Post on 25-Jan-2023
2018
(Incorporated under the laws of the Cayman Islands with limited liability)Stock code : 01848
Interim Report 2018
INTERIM REPORT 中
期 報 告
中 期 報 告
2018C
hina Aircraft Leasing G
roup Holdings Lim
ited 中國飛機租賃集團控股有限公司
始於願景成就現實
( 根據開曼群島法例註冊成立的有限公司 ):股份代號 01848
CONTENTSCorporate Information 2
Management Discussion and Analysis 3
Other Information 17
Report on Review of Interim Financial Information 27
Interim Consolidated Balance Sheet 28
Interim Consolidated Statement of Income 29
Interim Consolidated Statement of Comprehensive Income 30
Interim Consolidated Statement of Changes in Equity 31
Interim Consolidated Statement of Cash Flows 32
Notes to the Interim Condensed Consolidated
Financial Information 34
CORPORATE INFORMATION
China Aircraft Leasing Group Holdings Limited Interim Report 20182
BOARD OF DIRECTORSExecutive DirectorsMr. CHEN Shuang, JP (Chairman)Mr. POON Ho Man (Chief Executive Officer)Ms. LIU Wanting (Deputy Chief Executive Officer)
Non-executive DirectorMr. TANG Chi Chun
Independent Non-executive DirectorsMr. FAN Yan Hok, PhilipMr. NIEN Van Jin, RobertMr. CHEOK Albert SaychuanMr. CHOW Kwong Fai, Edward, JP
COMPOSITION OF COMMITTEESAudit CommitteeMr. CHOW Kwong Fai, Edward, JP (chairman)Mr. FAN Yan Hok, PhilipMr. NIEN Van Jin, RobertMr. CHEOK Albert Saychuan
Remuneration CommitteeMr. FAN Yan Hok, Philip (chairman)Mr. NIEN Van Jin, RobertMr. CHEOK Albert SaychuanMr. CHOW Kwong Fai, Edward, JP
Nomination CommitteeMr. CHEOK Albert Saychuan (chairman)Mr. FAN Yan Hok, PhilipMr. NIEN Van Jin, RobertMr. CHOW Kwong Fai, Edward, JP
COMPANY SECRETARYMs. TAI Bik Yin
AUTHORISED REPRESENTATIVESMs. LIU WantingMs. TAI Bik Yin
AUDITORPricewaterhouseCoopersCertified Public Accountants
LEGAL ADVISERSLinklaters
REGISTERED OFFICEMaples Corporate Services LimitedPO Box 309Ugland HouseGrand CaymanKY1-1104Cayman Islands
PRINCIPAL PLACE OF BUSINESS IN HONG KONG28th Floor, Far East Finance Centre16 Harcourt RoadHong Kong
COMPANY’S WEBSITEwww.calc.com.hk
INVESTOR RELATIONS CONTACTir@calc.com.hk
SHARE REGISTRAR AND TRANSFER OFFICEPrincipal Share Registrar and Transfer OfficeMaples Fund Services (Cayman) LimitedPO Box 1093, Boundary HallCricket SquareGrand CaymanKY1-1102Cayman Islands
Branch Share Registrar and Transfer OfficeTricor Investor Services LimitedLevel 22, Hopewell Centre183 Queen’s Road EastHong Kong
PRINCIPAL BANKERS AND FINANCIAL INSTITUTIONSBank of China LimitedBank of Communications Co., LtdThe Bank of East Asia, LtdBank of Jiangsu Co., LtdBank SinoPac Co., LtdBNP ParibasCathay United Bank Co., LtdChina Construction Bank CorporationChina Development BankChina Everbright Bank Co., LtdChina Merchants Bank Co., LtdChina Minsheng Banking Corp., LtdChiyu Banking Corporation LtdChong Hing Bank LimitedCredit Agricole Corporate and Investment BankCrédit Industrial et CommercialCredit Suisse Securities (USA) LLCDah Sing Bank LimitedDeutsche Bank AGDevelopment Bank of Japan Inc.E.Sun Commercial Bank, LtdEnTie Commercial BankThe Export-Import Bank of ChinaGoldman Sachs (Asia) L.L.C.The Hong Kong and Shanghai Banking Corporation LimitedHua Nan Commercial Bank, Ltd.Industrial and Commercial Bank of China (Asia) LimitedKDB Asia LimitedKEB Hana BankKfW IPEX-Bank GmbHThe Korea Development BankMega International Commercial Bank Co., LtdShanghai Pudong Development Bank Co., LtdSinoPac Leasing Corp.Société GénéraleTaishin International Bank Co., LtdTaiwan Cooperative Bank LimitedToronto-Dominion Bank
STOCK CODEThe Company’s shares are listed on the Main Board of The Stock Exchange of Hong Kong LimitedStock Code: 01848
MANAGEMENT DISCUSSION AND ANALYSIS
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 3
INTERIM BUSINESS REVIEWIn the first half of 2018, China Aircraft Leasing Group Holdings Limited (“CALC” or the “Company”, together
with its subsidiaries, the “Group”) took delivery of nine aircraft as it continued to explore different channels
to optimise its portfolio, including new aircraft deliveries from its order book, purchase and leasebacks, and
portfolio trading. The fleet size grew to 115 aircraft as at 30 June 2018, of which 111 were owned aircraft
and four were managed for China Aircraft Global Limited (“CAG”), an investment vehicle launched in June
2018 to invest in aircraft portfolios on lease to global airlines.
ASSET-LIGHT MODEL IN FULL PLAYWith the establishment of CAG, CALC has made great strides in its transition towards an asset-light business
model. This is an important strategic move that supports the Group’s increasing business capacity and its
continued global expansion. The pioneering model provides an optimal approach for the Group to evolve
ahead of the market, achieve sustainability and thrive in this traditionally capital-intensive industry in a
competitive and vibrant aviation landscape. In addition, CALC has started engaging in the aircraft trading
business as part of its strategy to bolster its asset management capabilities amidst the transition.
In June 2018, CALC joined hands with three leading state-owned enterprises engaged in overseas investment,
the insurance business and the aviation sector as mezzanine financiers, held at a ratio of 20% and 80%, to
roll out the global aircraft investment vehicle – CAG. On top of shareholder loans, the funding for CAG is
accompanied by senior syndicated financing from a number of renowned international and Chinese banks.
CAG’s aircraft assets are expected to grow to around US$1,200 million within two years. Leveraging its
efficient capabilities in global aircraft asset management and close partnerships with its aviation partners,
CALC will provide aircraft and lease management service to CAG.
Tapping into the institutional investors’ strong appetite for quality aircraft leasing assets with stable and
long-term cash flow, CAG is a replicable model that advances the Group’s capital efficiency to provide
recurring support for the Group’s sustainable growth. It also allows CALC, as a service provider, to increase
its aircraft assets under management, and hence further strengthen the Group’s position as an full value-
chain aircraft solutions provider for the global aviation industry.
During the period under review, four aircraft were sold and injected into CAG, whilst another 14 aircraft
are expected to be put into the vehicle by the end of the year.
Alongside its progress in establishing CAG, CALC completed the disposal of finance lease receivables for one
aircraft during the period under review.
MANAGEMENT DISCUSSION AND ANALYSIS
China Aircraft Leasing Group Holdings Limited Interim Report 20184
OUR FLEETCALC maintains one of the youngest and most modern fleets in the sector, as well as one of the longest
average remaining lease terms. As at 30 June 2018, its fleet has an average age of 3.9 years and average
remaining lease terms of approximately 8.2 years.
In addition to being one of the launch customers of the latest edition B737 MAX 10 from The Boeing
Company (“Boeing”), CALC continued to add highly liquid models that incorporate the latest technology and
deliver high efficiency and reliability in its fleet, with the delivery of its first Airbus S.A.S (“Airbus”) A321neo
aircraft during the period under review. In January 2018, CALC ordered 15 additional Airbus A320neos. As at
30 June 2018, CALC had 189 aircraft in its order book, comprising 139 Airbus and 50 Boeing aircraft, which
will be delivered by 2023. Its close relationships with Original Equipment Manufacturer (“OEM”) partners
put the Group in an excellent position to address clients’ aircraft requirements.
As part of its globalisation initiative, CALC continued to expand and diversify its overseas customer portfolio
in the first half of 2018. Among the aircraft delivered during the period under review, four were delivered
to domestic airlines and five to overseas carriers. Of the current fleet of 111 owned and four managed
aircraft, mainland Chinese airlines took up approximately 69.0% and non-Chinese carriers approximately
31.0%. As a result, CALC’s client base increased to 30 airlines in 14 countries and regions as at 30 June 2018.
FULL VALUE CHAINAs part of its progressive development into an aircraft manager, the Group has sharpened its asset
management capabilities by leveraging its synergy with its associate company Aircraft Recycling International
Limited (“ARI”), a one-stop solutions provider for mid-to-old aged aircraft. During the period under review,
CALC partnered with ARI to complete the redelivery, export and lease of an end-of lease Airbus A321,
demonstrating the Group’s distinct capabilities in aircraft full life-cycle solutions.
ARI’s aircraft recycling facility in Harbin (the “Harbin Base”), which is also Asia’s first large-scale aircraft
recycling facility, commenced operation in June 2018 with an initial handling capacity of 20 aircraft per
year. The Harbin Base is equipped with modern facilities and tools that utilise advanced technology. ARI
strives to cover seven areas of business operation, namely mid-aged aircraft purchasing, selling, leasing,
disassembling, replacing, conversion and maintenance. Together, these operations provide dynamic aircraft
recycling solutions for airlines, MROs and lessors, as well as for manufacturers and distributors of aircraft
components.
Meanwhile, Universal Asset Management (“UAM”), a wholly owned subsidiary of ARI, has demonstrated
efficient transaction capabilities by leveraging its established expertise in end-of-life aircraft asset
management. It is noteworthy that UAM has become the first in the world to recycle carbon fibre from
commercial aircraft, extending the usability of composites from end-of-life aircraft.
MANAGEMENT DISCUSSION AND ANALYSIS
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 5
OUTLOOKLooking ahead, the Group remains optimistic about the global demand for aircraft, especially with the
aircraft leasing industry resetting its gear to the east. Although the current aviation landscape is clouded
by brewing trade tensions between China and the US, the Group is hopeful that the two countries will
eventually work out a good solution and such chill will not create material impact to the industry in the
long run. As regards concerns over rising interest rates and oil prices, the aviation industry has over the past
few decades proven to be resilient to different kinds of external headwind. A sustained boom in passenger
traffic, driven by emerging markets with an increasing middle-class population that yearn for air travel,
coupled with the burgeoning development of low-cost-carriers, creates a favourable environment for the
industry to flourish. As aircraft leasing has gone from being a niche industry to becoming more mainstream,
aviation finance has seen a significant uptick, with the financing community clamouring for quality aircraft
assets with long-term, stable returns and high liquidity.
In the light of such a positive industry backdrop, the Group will continue to deepen its vertical and horizontal
integration to consolidate its leading position in the market. While strengthening its transaction efficiency,
widening its financing base and expanding its technical know-how to solidify its position as a full value-chain
aircraft solutions provider, aided by the technical expertise of ARI and UAM, CALC is seeking to manage
an enlarged and diversified aircraft portfolio powered by its asset-light business model. As it channels
more resources into developing its aircraft trading business, CALC is set to improve its asset management
competency, amplifying its competitive advantage in order to strengthen its long-term ties with aircraft
OEMs, airlines, financiers, investors and other players along the aircraft value chain.
MANAGEMENT DISCUSSION AND ANALYSIS
China Aircraft Leasing Group Holdings Limited Interim Report 20186
1. RESULTSFor the six months ended 30 June 2018, the Group delivered nine aircraft and disposed five aircraft,
building its fleet size to 111. Revenue and other income was HK$1,612.1 million, an increase of
HK$354.1 million or 28.1% from the corresponding period last year. Profit for the period ended
30 June 2018 amounted to HK$307.8 million, an increase of HK$59.1 million or 23.8% compared with
the corresponding period last year. This was mainly due to increased lease income from continued
expansion of the Group’s aircraft leasing business.
Total assets were HK$40,086.4 million as at 30 June 2018, compared with HK$37,994.3 million as at
31 December 2017, an increase of HK$2,092.1 million or 5.5%. The increase in assets was mainly due to
the increase in pre-delivery payments (“PDP”) made for aircraft acquisition during the current period.
Total liabilities amounted to HK$36,559.4 million as at 30 June 2018, an increment of HK$1,992.2
million or 5.8% compared with HK$34,567.2 million as at 31 December 2017, which was in line with
the increase in total assets.
The equity attributable to shareholders of the Company was HK$3,527.0 million as at 30 June 2018
compared with HK$3,427.2 million as at 31 December 2017, an increase of HK$99.8 million or 2.9%.
MANAGEMENT DISCUSSION AND ANALYSIS
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 7
2. ANALYSIS OF INCOME AND EXPENSES
Unaudited
Six months ended 30 June
2018 2017 Change
HK$’Million HK$’Million
Finance lease income 432.4 540.6 –20.0%
Operating lease income 729.7 340.3 114.4%
Total lease income 1,162.1 880.9 31.9%
Net gain from aircraft transactions 243.0 289.6 –16.1%
Government grants 118.1 49.4 139.1%
Interest income from loans to an associate 44.8 12.4 261.3%
Bank interest income 7.1 19.6 –63.8%
Sundry income 37.0 6.1 506.6%
Other income 450.0 377.1 19.3%
Total revenue and other income 1,612.1 1,258.0 28.1%
Total operating expenses (1,200.3) (903.9) 32.8%
Other gains/(losses) 7.1 (11.3) N/A
Profit before income tax 418.9 342.8 22.2%
Income tax expenses (111.1) (94.1) 18.1%
Profit for the period 307.8 248.7 23.8%
MANAGEMENT DISCUSSION AND ANALYSIS
China Aircraft Leasing Group Holdings Limited Interim Report 20188
2. ANALYSIS OF INCOME AND EXPENSES (continued)
2.1 Revenue and Other IncomeFor the six months ended 30 June 2018, revenue and other income amounted to HK$1,612.1
million compared with HK$1,258.0 million for the corresponding period last year, an increase of
HK$354.1 million or 28.1%. This was mainly due to an increase in lease income.
Lease income from finance leases and operating leases for the six months ended 30 June 2018 was
totalled HK$1,162.1 million, compared with HK$880.9 million for the six months ended 30 June
2017, an increase of HK$281.2 million or 31.9%. The decrease in finance lease income was due to
disposal of 11 aircraft’s finance lease receivables during the second half of 2017 and one aircraft’s
finance lease receivables during the six months ended 30 June 2018. The growth in operating
lease income was attributable to the increase in fleet size under operating leases from 25 aircraft
as at 30 June 2017 to 42 aircraft as at 30 June 2018.
The Group recognised a net gain of HK$243.0 million from aircraft transactions during the six
months ended 30 June 2018 (six months ended 30 June 2017: HK$289.6 million), a decrease of
HK$46.6 million or 16.1%. During the period under review, the Group completed disposal of
finance lease receivables of one aircraft, disposal of one aircraft to ARI and disposal of four
aircraft to CAG. During the six months ended 30 June 2017, the Group completed disposal of
finance lease receivables of 10 aircraft.
Government grants for the six months ended 30 June 2018 amounted to HK$118.1 million,
compared with HK$49.4 million for the six months ended 30 June 2017, an increase of HK$68.7
million or 139.1%. The increase in government grants was mainly due to increase in aircraft fleet
size and speed up administrative process in approving payment of government grants.
MANAGEMENT DISCUSSION AND ANALYSIS
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 9
2. ANALYSIS OF INCOME AND EXPENSES (continued)
2.2 Total Operating ExpensesDuring the six months ended 30 June 2018, the Group had the following operating expenses.
Unaudited
Six months ended 30 June
2018 2017 Change
HK$’Million HK$’Million
Interest expenses 697.9 614.6 13.6%
Depreciation 289.9 131.4 120.6%
Other operating expenses 212.5 157.9 34.6%
Total operating expenses 1,200.3 903.9 32.8%
(a) Interest Expenses
For the six months ended 30 June 2018, interest expenses incurred by the Group amounted
to HK$697.9 million compared with HK$614.6 million in the corresponding period last year,
an increase of HK$83.3 million or 13.6%. The increase was mainly due to an increase of
interest-bearing borrowings to finance additions of aircraft during the current period to
support business expansion.
(b) Depreciation
Depreciation on the Group’s aircraft under operating leases, leasehold improvements, office
equipment, building and other assets for the six months ended 30 June 2018 was HK$289.9
million compared with HK$131.4 million in the corresponding period last year, an increase of
HK$158.5 million or 120.6%. This was attributable to an increase in the number of aircraft
under operating leases from 25 aircraft as at 30 June 2017 to 42 aircraft as at 30 June 2018.
(c) Other Operating Expenses
Other operating expenses mainly represented salaries and bonuses, professional fees related
to the aircraft leasing business, and rentals and office administration expenses. The Group’s
globalisation strategy, which includes plans to diversify its overseas client base and expand
overseas offices, led to an increase in business running costs and manpower from 152 as at
30 June 2017 to 172 as at 30 June 2018.
2.3 Income Tax ExpensesIncome tax for the six months ended 30 June 2018 was HK$111.1 million (six months ended 30 June 2017: HK$94.1 million), resulting mainly from the increased profits achieved through growth in the leasing business and the net gain from aircraft transactions.
MANAGEMENT DISCUSSION AND ANALYSIS
China Aircraft Leasing Group Holdings Limited Interim Report 201810
3. ANALYSIS OF FINANCIAL POSITION 3.1 Assets
As at 30 June 2018, the Group’s total assets amounted to HK$40,086.4 million compared with HK$37,994.3 million as at 31 December 2017, an increase of HK$2,092.1 million or 5.5%.
Unaudited Audited
As at
30 June
2018
As at
31 December
2017 Change
HK$’Million HK$’Million
Finance lease receivables – net 12,065.4 12,556.2 –3.9%
Property, plant and equipment 11,743.9 13,059.4 –10.1%
Interests in and loans to associates 929.7 870.2 6.8%
Cash and bank balances 5,957.4 7,396.2 –19.5%
Prepayments and other assets 9,069.1 4,021.5 125.5%
Derivative financial assets 174.7 90.8 92.4%
Financial asset at fair value
through profit or loss 146.2 – N/A
Total assets 40,086.4 37,994.3 5.5%
3.1.1 Finance Lease Receivables – Net and Property, Plant and EquipmentThe majority of total assets as at 30 June 2018 represented finance lease receivables and property, plant and equipment.
Net finance lease receivables represented the present value of minimum lease payments receivable from aircraft classified as finance leases and their residual values. There was a decrease in finance lease receivables from HK$12,556.2 million as at 31 December 2017 to HK$12,065.4 million as at 30 June 2018, mainly because the Group completed disposal of
finance lease receivables for one aircraft during the current period.
Property, plant and equipment mainly included the cost of aircraft classified as operating leases, net of their accumulated depreciation. Decrease in property, plant and equipment was mainly due to disposal of five aircraft during the current period.
MANAGEMENT DISCUSSION AND ANALYSIS
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 11
3. ANALYSIS OF FINANCIAL POSITION (continued)
3.1 Assets (continued)
3.1.2 Prepayments and Other Assets
Prepayments mainly represented PDP made to aircraft manufacturers for aircraft acquisition
of HK$4,698.5 million (31 December 2017: HK$3,433.5 million). The increase in PDP amounts
was due to the increase in aircraft purchase commitment requiring PDP during the current
period.
Other assets mainly consisted of aircraft reclassified as held for sale and intended to be
disposed to CAG. No such item was noted as at 31 December 2017.
3.1.3 Financial Asset at Fair Value through Profit or Loss
Balance represented fund injected through shareholder’s loan from the Group to CAG
for aircraft investment during the current period. The shareholder’s loan from the Group
representing 20% of the investment in CAG as at 30 June 2018.
3.2 LiabilitiesAs at 30 June 2018, the Group’s total liabilities amounted to HK$36,559.4 million compared with
HK$34,567.2 million as at 31 December 2017, an increase of HK$1,992.2 million or 5.8%, which
was in line with the increase in total assets.
An analysis is given as follows:
Unaudited Audited
As at
30 June
2018
As at
31 December
2017 Change
HK$’Million HK$’Million
Bank borrowings 15,593.8 16,458.4 –5.3%
Bonds 8,584.2 8,538.9 0.5%
Long-term borrowings 5,368.7 5,329.4 0.7%
Medium-term notes 788.8 798.1 –1.2%
Deferred income tax liabilities 644.6 544.5 18.4%
Convertible bonds – 153.2 N/A
Interest payables 282.3 226.8 24.5%
Income tax payables 8.9 17.3 –48.6%
Derivative financial liabilities – 0.2 N/A
Other liabilities and accruals 5,288.1 2,500.4 111.5%
Total liabilities 36,559.4 34,567.2 5.8%
MANAGEMENT DISCUSSION AND ANALYSIS
China Aircraft Leasing Group Holdings Limited Interim Report 201812
3. ANALYSIS OF FINANCIAL POSITION (continued)
3.2 Liabilities (continued)
3.2.1 Bank Borrowings
The an alysis of bank borrowings is as follows:
Unaudited Audited
As at
30 June
2018
As at
31 December
2017 Change
HK$’Million HK$’Million
Bank borrowings for aircraft
acquisition financing 11,718.7 13,981.6 –16.2%
PDP financing 3,053.2 1,709.1 78.6%
Working capital borrowings 821.9 767.7 7.1%
Total bank borrowings 15,593.8 16,458.4 –5.3%
3.2.2 Convertible Bonds
In May 2018, the convertible bonds were fully redeemed upon maturity.
3.2.3 Other Liabilities and Accruals
Other liabilities and accruals mainly included deposits received from lessees, as well as bank
borrowings for aircraft acquisition financing directly associated with assets reclassified as
held for sale intending to be disposed to CAG as at 30 June 2018.
MANAGEMENT DISCUSSION AND ANALYSIS
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 13
4. ANALYSIS OF CASH FLOWSThe following table illustrates the cash position and cash flows for the six months ended 30 June 2018:
UnauditedSix months ended 30 June
2018 2017HK$’Million HK$’Million
I: Aircraft in operationLease income 1,085.4 1,017.8Bank interest and repayment (779.6) (764.3)
305.8 253.5
II: Aircraft purchase and deliveryCapital expenditure (3,252.3) (3,028.6)Bank borrowings 3,047.9 1,734.4
(204.4) (1,294.2)
III: New aircraft not yet deliveredPDP paid (1,699.3) (1,476.3)PDP refunded 448.9 898.1PDP financing 1,621.0 297.9PDP financing interest and repayment (350.7) (742.8)Advance payment for aircraft purchase (346.0) –
(326.1) (1,023.1)
IV: Net capital movementProceeds from issue of new shares from exercise of share options – 16.2Dividends paid (284.8) (263.3)Disposal of finance lease receivables and aircraft and proceeds
from long-term borrowings 1,939.9 3,802.3Early loan repayment on disposal of finance lease receivables
and aircraft (1,195.0) (1,450.8)Net proceeds from issuance of bonds – 3,857.2Net payments relating to interests in and loans to associates (14.7) (686.1)Convertible bonds repurchase, interest and repayment (155.2) (156.9)Investment to financial asset at fair value through profit or loss (146.2) –Working capital loan net repayment and net cash used
in other operating activities (1,258.6) (2,348.4)
(1,114.6) 2,770.2
Net (decrease)/increase in cash and cash equivalents (1,339.3) 706.4Cash and cash equivalents at beginning of the period 7,023.4 5,840.7Currency exchange difference on cash and cash equivalents 11.0 54.8
Cash and cash equivalents at end of the period 5,695.1 6,601.9
MANAGEMENT DISCUSSION AND ANALYSIS
China Aircraft Leasing Group Holdings Limited Interim Report 201814
5. CAPITAL MANAGEMENTThe primary objective of the Group’s capital management policy is to ensure that it maintains a
strong credit standing, as well as healthy financial ratios in order to support its business and maximise
shareholder value.
Operations and capital expenditure requirements are funded by a combination of cash generated from
operating activities, bank borrowings, long-term borrowings, issuance of bonds and medium-term notes,
and disposal of finance lease receivables and aircraft. In order to meet the current rapid expansion,
the Group will also consider both capital and debt financing opportunities.
For the six months ended 30 June 2018, the objectives, policies and processes for managing capital
remained largely unchanged. The Group made full use of capital leverage to keep pace with aircraft
delivery.
The Group monitors capital through gearing ratios:
Unaudited AuditedAs at
30 June 2018
As at 31 December
2017 ChangeHK$’Million HK$’Million
Interest-bearing debts included in total liabilities 32,902.0 31,278.0 5.2%Total assets 40,086.4 37,994.3 5.5%Gearing ratio 82.1% 82.3% –0.2p.p.
The majority of the Group’s cash and bank balances, borrowings and bonds are denominated in US$,
for which the currency exchange risk is insignificant. The Group has entered into floating-to-fixed
interest rate swaps to hedge against interest rate exposure.
6. HUMAN RESOURCESAs at 30 June 2018, staff of the Group numbered 172 (30 June 2017: 152). Total remuneration of
employees for the six months ended 30 June 2018 amounted to HK$75.7 million (six months ended
30 June 2017: HK$57.4 million).
The Group has established effective employee incentive schemes to link the remuneration of its
employees with their overall performance and contributions, and has established a merit-based
remuneration awards system. It has also adopted share option schemes for the purpose of recognising
the contribution of eligible employees to the growth of the Group.
MANAGEMENT DISCUSSION AND ANALYSIS
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 15
7. CONTRACTUAL OBLIGATIONS, CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS 7.1 Contingent Liabilities
The Group had no material contingent liabilities outstanding as at 30 June 2018 (31 December
2017: Nil).
7.2 Capital Commitments for Aircraft Acquisition and Aircraft Purchase MandateThe Group’s total aircraft purchase commitment amounted to HK$83.3 billion as at 30 June 2018
(31 December 2017: HK$76.0 billion), representing estimated total purchase costs of the aircraft
contracted to be purchased and delivered, net of PDP paid.
As at 30 June 2018, the Group had 189 aircraft in its order book, comprising 139 Airbus and 50
Boeing aircraft, which will be delivered by the end of 2023.
Under the terms of a general mandate (the “2017 Aircraft Purchase Mandate”) granted to the
Directors by the shareholders of the Company on 22 May 2017, the Directors are authorised to
purchase from either Airbus or Boeing, each limited to 70 new aircraft of certain types with
an aggregate 2017 list price not exceeding approximately US$8.9 billion and US$8.3 billion
respectively (equivalent to approximately HK$69.82 billion and HK$65.12 billion respectively).
Further details of the 2017 Aircraft Purchase Mandate are set out in the circular of the Company
dated 19 April 2017.
Pursuant to the 2017 Aircraft Purchase Mandate, the Group has committed to purchase a
cumulative number of 50 aircraft from Boeing with an aggregate 2017 list price of approximately
US$5.8 billion (equivalent to approximately HK$45.50 billion) and 70 aircraft from Airbus with an
aggregate 2017 list price of approximately US$7.54 billion (equivalent to approximately HK$59.15
billion). Please refer to the Company’s announcement dated 14 June 2017, 21 December 2017,
28 December 2017 and 4 January 2018 for further details.
At the 2018 annual general meeting of the Company held on 9 May 2018, shareholders of the
Company granted to the Directors a new general mandate (the “2018 Aircraft Purchase Mandate”)
increasing the limits of purchase from either Airbus or Boeing, each limited to 100 new aircraft
of certain types with an aggregate 2018 list price not exceeding approximately US$13 billion
(equivalent to approximately HK$101.99 billion). Further details of the 2018 Aircraft Purchase
Mandate are set out in the circular of the Company dated 9 April 2018.
As at the date of this report, the Group has not committed to purchase any aircraft pursuant to
the 2018 Aircraft Purchase Mandate.
MANAGEMENT DISCUSSION AND ANALYSIS
China Aircraft Leasing Group Holdings Limited Interim Report 201816
7. CONTRACTUAL OBLIGATIONS, CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS (continued)
7.2 Capital Commitments for Aircraft Acquisition and Aircraft Purchase Mandate (continued)
The prices are not fixed at the time of entering into the relevant agreement and can only be
determined upon the final specifications of the aircraft. The final purchase prices paid by the
Company will be lower than the list prices because of differing aircraft specifications and various
price concessions, credits or discounts that may be provided by the manufacturers. As a result, the
final purchase prices of the aircraft are expected to be substantially less than the manufacturers’
list prices.
7.3 Shareholder Loan Commitment for Investment in CAGThe Group committed shareholder loan for investment in CAG amounted to approximately US$73.0
million (equivalent to approximately HK$572.7 million), of which US$18.6 million (equivalent
to approximately HK$146.2 million) had been drawn down up to 30 June 2018. The Group’s
outstanding committed shareholder loan for investment in CAG as at 30 June 2018 was US$54.4
million (equivalent to approximately HK$426.5 million).
Other than the capital commitments stated above, the Group had no material plans for major
investment or capital assets acquisition.
OTHER INFORMATION
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 17
DISCLOSURE OF INTERESTSDirectors’ and Chief Executive’s Interests and/or Short Positions in the Shares, Underlying Shares and Debentures of the Company or any of its Associated CorporationsAs at 30 June 2018, the interests or short positions of Directors and the chief executive of the Company
in shares of the Company (the “Shares”), underlying Shares and/or debentures (as the case may be) of the
Company and/or any of its associated corporations (within the meaning of Part XV of the Securities and
Futures Ordinance (the “SFO”)) as recorded in the register required to be kept by the Company under
Section 352 of the SFO, or as otherwise required to be notified to the Company and The Stock Exchange
of Hong Kong Limited (the “Stock Exchange”) pursuant to the Model Code for Securities Transactions by
Directors of Listed Issuers (the “Model Code”) as set out in Appendix 10 to the Rules Governing the Listing
of Securities (the “Listing Rules”) on the Stock Exchange are as follows:
Number of Shares Held (L)(1)
Name of Directors Capacity
Number of
Shares/
underlying
Share held
Total
interests
Approximate
percentage
of Shares
in issue (2)
CHEN Shuang Beneficial owner 400,000
Beneficial owner 10,000,000 (3) 10,400,000 1.53%
POON Ho Man Interest of controlled
corporation
197,554,589 (4)
Interest of spouse 3,800,000 (5) 201,354,589 29.69%
LIU Wanting Interest of controlled
corporation
10,000,000 (6)
Beneficial owner 3,000,000 (3) 13,000,000 1.92%
TANG Chi Chun Beneficial owner 200,000 200,000 0.03%
FAN Yan Hok, Philip Beneficial owner 200,000 200,000 0.03%
NIEN Van Jin, Robert Beneficial owner 234,000 234,000 0.03%
CHEOK Albert Saychuan Beneficial owner 5,000
Beneficial owner 200,000 (3) 205,000 0.03%
CHOW Kwong Fai, Edward Beneficial owner 200,000 (3) 200,000 0.03%
OTHER INFORMATION
China Aircraft Leasing Group Holdings Limited Interim Report 201818
DISCLOSURE OF INTERESTS (continued)
Directors’ and Chief Executive’s Interests and/or Short Positions in the Shares, Underlying Shares and Debentures of the Company or any of its Associated Corporations (continued)
Notes:
(1) The letter “L” denotes the entity/person’s long position in the securities.
(2) Based on 678,183,380 Shares in issue as at 30 June 2018.
(3) These interests represented the interests in the underlying Shares in respect of the share options granted by the Company
to Directors pursuant to the Post-IPO Share Option Scheme.
(4) Mr. POON Ho Man was deemed to be interested in 197,554,589 Shares in the following manner:
(a) 182,554,589 Shares held by Friedmann Pacific Asset Management Limited, a substantial shareholder of the Company
which is owned as to 0.000001% by Ms. Christina NG, the spouse of Mr. POON, and 99.999999% by Capella Capital
Limited, which is in turn owned as to 10% by Ms. NG and 90% by Mr. POON; and
(b) 15,000,000 Shares held by Equal Honour Holdings Limited, a company wholly-owned by Mr. POON.
(5) These interests represented the interests in the underlying Shares in respect of the share options granted by the Company
to Ms. Christina NG pursuant to the Post-IPO Share Option Scheme.
(6) These Shares were held by Smart Vintage Investments Limited, a company wholly-owned by Ms. LIU Wanting.
Save as disclosed above, as at 30 June 2018, none of the Directors or the chief executive of the Company
had any interests or short positions in any Shares, underlying Shares and/or debentures (as the case may
be) of the Company and/or any of its associated corporations (within the meaning of Part XV of the SFO)
which was required to be: i) notified to the Company and the Stock Exchange pursuant to Divisions 7 and
8 of Part XV of the SFO (including any interest and short position which he/she was taken or deemed to
have under such provisions of the SFO); or ii) entered in the register of interests required to be kept by
the Company pursuant to section 352 of the SFO; or iii) notified to the Company and the Stock Exchange
pursuant to the Model Code.
Arrangements for the Directors to purchase Shares or DebenturesSave as disclosed herein, at no time during the six months ended 30 June 2018 were there any rights
to acquire benefits by means of the acquisition of Shares in or debentures of the Company granted to
any Director or their respective spouse or children under 18 years of age, nor were there any such rights
exercised by them. Also, there was no arrangement to which the Company, its holding company, or any
of its subsidiaries or fellow subsidiaries is a party that would enable the Directors to acquire such rights in
any other body corporate.
OTHER INFORMATION
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 19
DISCLOSURE OF INTERESTS (continued)
Substantial Shareholders’ and Other Persons’ Interests and Short Positions in the Shares and Underlying SharesBased on the information available to the Directors as at 30 June 2018 (including such information as was
available on the website of the Stock Exchange) or so far as they are aware of, as at 30 June 2018, the
entities and/or persons who had interests or short positions in the Shares or underlying Shares which fall
to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which
were recorded in the register required to be kept by the Company under Section 336 of the SFO or had
otherwise notified to the Company are as follows:
Number of Shares Held (L)(1)
Name of shareholders Capacity
Number of Shares/underlying
Shares heldTotal
interests
Approximate percentage of
Shares in issue(2)
China Everbright Aerospace Holdings Limited (“CE Aerospace”)
Beneficial owner 208,979,479(3) 208,979,479 30.81%
China Everbright Limited (“CEL”) Interest of controlled corporation
227,734,479(3) 227,734,479 33.58%
China Everbright Holdings Company Limited (“CE Hong Kong”)
Interest of controlled corporation
227,734,479(4) 227,734,479 33.58%
China Everbright Group Ltd (“CE Group”)
Interest of controlled corporation
227,734,479(5) 227,734,479 33.58%
Central Huijin Investment Limited (“Huijin Limited”)
Interest of controlled corporation
227,734,479(5) 227,734,479 33.58%
Friedmann Pacific Asset Management Limited (“FPAM”)
Beneficial owner 182,554,589(6) 182,554,589 26.92%
Capella Capital Limited (“Capella”) Interest of controlled corporation
182,554,589(6) 182,554,589 26.92%
POON Ho Man Interest of controlled corporation
197,554,589(7)
Interest of spouse 3,800,000(9) 201,354,589 29.69%
Christina NG Interest of spouse 197,554,589(8)
Beneficial owner 3,800,000(9) 201,354,589 29.69%
OTHER INFORMATION
China Aircraft Leasing Group Holdings Limited Interim Report 201820
DISCLOSURE OF INTERESTS (continued)
Substantial Shareholders’ and Other Persons’ Interests and Short Positions in the Shares and Underlying Shares (continued)
Notes:
(1) The letter “L” denotes the entity/person’s long position in the securities.
(2) Based on 678,183,380 Shares in issue as at 30 June 2018.
(3) CEL was deemed to be interested in 208,979,479 and 18,755,000 Shares held by CE Aerospace and China Everbright
Financial Investments Limited respectively, both of which are wholly-owned by CEL.
(4) CE Hong Kong indirectly holds more than one-third of the voting power at general meetings of CEL. Accordingly, CE
Hong Kong is deemed to be interested in all Shares mentioned in note (3) above.
(5) According to the Company’s announcements in respect of the restructuring of CE Group dated 10 November 2014,
25 November 2014, 8 December 2014 and 14 May 2015, CE Group and Huijin Limited are deemed to be interested in all
Shares mentioned in notes (3) and (4) above.
(6) The issued share capital of FPAM is owned as to 0.000001% by Ms. Christina NG and 99.999999% by Capella. Accordingly,
Capella is deemed to be interested in all Shares held by FPAM.
(7) The issued share capital of Capella is owned as to 10% by Ms. Christina NG and 90% by Mr. POON Ho Man. Accordingly,
Mr. POON is deemed to be interested in all Shares mentioned in note (6) above. Mr. POON is also interested in 15,000,000
Shares held by Equal Honour Holdings Limited, a company wholly-owned by Mr. POON.
(8) Ms. Christina NG is the spouse of Mr. POON Ho Man and is deemed to be interested in all Shares held by Mr. POON as
mentioned in note (7) above.
(9) These interests represented the interests in underlying shares in respect of the share options granted by the Company to
Ms. Christina NG pursuant to the Post-IPO Share Option Scheme.
Save as disclosed above, as at 30 June 2018, the Directors are not aware of any person who had an interest
or short position in the Shares or underlying Shares which would be required to be disclosed to the Company
and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO or, directly or
indirectly, be interested in 5% or more of the nominal value of any class of share capital carrying rights to
vote in all circumstances at general meetings of the Company.
OTHER INFORMATION
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 21
CORPORATE GOVERNANCECompliance with the Corporate Governance CodeThe Board is committed to maintaining good corporate governance standards. The Group acknowledges the
vital importance of good corporate governance to the Group’s success and sustainability.
The Board is also committed to achieving a high standard of corporate governance as an essential component
of quality and has applied corporate governance practices appropriate to the conduct and growth of business
of the Group.
The Board believes that good corporate governance standards are essential in providing a framework for the
Company to formulate its business strategies and policies, and to enhance its transparency, accountability
and shareholder value.
The Company has adopted the principles as set out in the Corporate Governance Code (the “CG Code”)
contained in Appendix 14 to the Listing Rules.
The Company has complied with all Code Provisions as set out in the CG Code during the six months ended
30 June 2018.
The Company will continue to enhance its corporate governance practices as appropriate to the conduct
and growth of its business and to review and evaluate such practices from time to time to ensure that it
complies with the CG Code and aligns with the latest developments.
Directors’ Securities TransactionsThe Company has adopted the Model Code as set out in Appendix 10 to the Listing Rules as the code of
conduct regarding securities transactions by its Directors. Following specific enquiries by the Company, all
Directors have confirmed that they have complied with the required standard as set out in the Model Code
throughout the six months ended 30 June 2018.
BOARD COMMITTEESAudit CommitteeThe Audit Committee was established by the Board in September 2013 with written terms of reference in
compliance with Rule 3.21 of the Listing Rules and Code Provision C.3 of the CG Code. The primary duties
of the Audit Committee include but not limited to reviewing and supervising the Group’s financial reporting
process, internal audit function, internal control and risk management systems, and providing advices and
comments to the Board. As at the date of this report, the Audit Committee consisted of Mr. CHOW Kwong
Fai, Edward (chairman), Mr. Fan Yan Hok, Philip, Mr. CHEOK Albert Saychuan and Mr. NIEN Van Jin, Robert,
all of them are independent non-executive Directors (“INEDs”). Two Audit Committee members including
the chairman of the Audit Committee hold appropriate professional qualifications or expertise in accounting
or relevant financial management.
OTHER INFORMATION
China Aircraft Leasing Group Holdings Limited Interim Report 201822
BOARD COMMITTEES (continued)
Audit Committee (continued)
During the period under review, the Audit Committee has reviewed with the management team and the
external auditor of the Company, PricewaterhouseCoopers (“PwC“), the accounting principles and practices
adopted by the Group and discussed matters regarding auditing, internal control, risk management and
financial reporting including the following:
• The review of the audited consolidated financial statements of the Group for the year ended
31 December 2017 and the unaudited consolidated financial statements of the Group for the six months
ended 30 June 2018, which have been reviewed by PwC in accordance with Hong Kong Standard on
Review Engagements 2410 “Review of Interim Financial Information performed by the Independent
Auditor of the Entity” issued by Hong Kong Institute of Certified Public Accountants;
• the discussion with PwC on the nature and scope of the audit and reporting obligations before
commencement of audit;
• the recommendation to the Board for the proposal for re-appointment of PwC and approval of the
remuneration and terms of engagement of PwC; and
• the review of the Company’s financial control, internal control and risk management systems, and the
effectiveness of the internal audit function.
Remuneration CommitteeThe Remuneration Committee was established by the Board in September 2013 with written terms of
reference in compliance with Rule 3.25 of the Listing Rules and Code Provision B.1 of the CG Code. The
primary duties of the Remuneration Committee include but not limited to regular monitoring of the
remuneration of all the Directors and senior management to ensure that levels of their remuneration and
compensation are appropriate. As at the date of this report, the Remuneration Committee consisted of
Mr. FAN Yan Hok, Philip (chairman), Mr. NIEN Van Jin, Robert, Mr. CHEOK Albert Saychuan and Mr. CHOW
Kwong Fai, Edward.
During the period under review, the Remuneration Committee has considered and recommended to the
Board the remuneration and other benefits paid by the Company to the Directors and senior management.
OTHER INFORMATION
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 23
BOARD COMMITTEES (continued)
Nomination CommitteeThe Nomination Committee was established by the Board in September 2013 with written terms of reference
in compliance with Code Provision A.5 of the CG Code. The primary duties of the Nomination Committee
include but not limited to selecting and recommending candidates for directorship, reviewing of the
structure, size and composition of the Board to achieve its diversity and assessing the independence of
INEDs. As at the date of this report, the Nomination Committee consisted of Mr. CHEOK Albert Saychuan
(chairman), Mr. FAN Yan Hok, Philip, Mr. NIEN Van Jin, Robert and Mr. CHOW Kwong Fai, Edward.
During the period under review, the Nomination Committee has reviewed the structure, size and composition
of the Board, assessed the independence of INEDs and made recommendation to the Board on the
appointment or re-election of Directors.
SHARE OPTION SCHEMESPre-IPO Share Option SchemeThe pre-IPO share option scheme (the “Pre-IPO Share Option Scheme”) was adopted by the Group on
4 August 2011 and taken over by the Company under the corporate reorganisation of the Group on 23 June
2014.
As at the date of this interim report, all share options granted under the Pre-IPO Share option Scheme were
exercised. Thus no outstanding Shares were available for issue thereunder. No share option was granted
under the Pre-IPO Share Option Scheme during the period under review.
During the period under review, the movement of share options granted under the Pre-IPO Share Option
Scheme is as follows:
Number of Shares under options Share price
Name of grantees Date of grant Tranche
At
1 January
2018
Granted
during
the period
Exercised
during
the period
Lapsed
during
the period
At
30 June
2018
Exercise
price
per Share
Immediately
before the
exercise date
per Share
(Note) Exercise period
US$ HK$
Senior management and
other employees
10/10/2011 A 1,980 – (1,980) – – 0.215 7.76 26/3/2016–26/3/2018
2,040 – (2,040) – – 0.215 7.76 26/3/2017–26/3/2018
Total 4,020 – (4,020) – –
Note: The price of the Shares disclosed is the weighted average closing price of the Shares immediately before the date on
which the share options were exercised during the period.
OTHER INFORMATION
China Aircraft Leasing Group Holdings Limited Interim Report 201824
SHARE OPTION SCHEMES (continued)
Post-IPO Share Option SchemeThe post-IPO share option scheme (the “Post-IPO Share Option Scheme”) was conditionally approved and adopted pursuant to a resolution in writing passed by the shareholders of the Company on 23 June 2014, which became effective on 11 July 2014.
As at the date of this interim report, the total number of Shares available for issue under the Post-IPO Share Option Scheme is 25,541,000 Shares (as at the date of the 2017 interim report of 25 August 2017: 26,699,000 Shares), which represented approximately 3.77% (as at 25 August 2017: 3.94%) of the issued share capital of the Company. No share option was granted or exercised under the Post-IPO Share Option Scheme during the period under review.
During the period under review, the movement of share options granted under the Post-IPO Share Option Scheme is as follows:
Number of Shares under options Share price
Name of grantees Date of grant
At1 January
2018
Grantedduring
the period
Exercisedduring
the period
Lapsedduring
the period
At30 June
2018
Exercise price
per Share Exercise periodHK$
DirectorsCHEN Shuang 22/7/2016 3,300,000 – – – 3,300,000 8.80 22/1/2017–21/7/2020
3,300,000 – – – 3,300,000 8.80 22/1/2018–21/7/20203,400,000 – – – 3,400,000 8.80 22/1/2019–21/7/2020
LIU Wanting 22/7/2016 990,000 – – – 990,000 8.80 22/1/2017–21/7/2020990,000 – – – 990,000 8.80 22/1/2018–21/7/2020
1,020,000 – – – 1,020,000 8.80 22/1/2019–21/7/2020
CHEOK Albert Saychuan 22/7/2016 66,000 – – – 66,000 8.80 22/1/2017–21/7/202066,000 – – – 66,000 8.80 22/1/2018–21/7/202068,000 – – – 68,000 8.80 22/1/2019–21/7/2020
CHOW Kwong Fai, Edward 22/7/2016 66,000 – – – 66,000 8.80 22/1/2017–21/7/202066,000 – – – 66,000 8.80 22/1/2018–21/7/202068,000 – – – 68,000 8.80 22/1/2019–21/7/2020
CHEN Chia-Ling (Note 1) 22/7/2016 66,000 – – (66,000) – 8.80 22/1/2017–21/7/202066,000 – – (66,000) – 8.80 22/1/2018–21/7/202068,000 – – (68,000) – 8.80 22/1/2019–21/7/2020
Sub-total 13,600,000 – – (200,000) 13,400,000 Connected PersonChristina NG (Note 2) 22/7/2016 1,254,000 – – – 1,254,000 8.80 22/1/2017–21/7/2020
1,254,000 – – – 1,254,000 8.80 22/1/2018–21/7/20201,292,000 – – – 1,292,000 8.80 22/1/2019–21/7/2020
Sub-total 3,800,000 – – – 3,800,000 Senior Management and other
Employees22/7/2016 2,686,200 – – – 2,686,200 8.80 22/1/2017–21/7/2020
2,851,200 – – (66,000) 2,785,200 8.80 22/1/2018–21/7/2020 2,937,600 – – (68,000) 2,869,600 8.80 22/1/2019–21/7/2020
Sub-total 8,475,000 – – (134,000) 8,341,000 Total 25,875,000 – – (334,000) 25,541,000
Notes:
(1) Ms. CHEN Chia-Ling retired from the position of a non-executive Director effective 9 May 2018.
(2) Ms. Christina NG is the spouse of Mr. POON Ho Man who is an executive Director and a substantial shareholder of the
Company.
OTHER INFORMATION
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 25
OTHERSChange of Directors’ Information Under Rule 13.51B(1) of the Listing RulesPursuant to Rule 13.51B(1) of the Listing Rules, the changes and updated information regarding the Directors
since the Company’s last published annual report and up to the date of this interim report are set out below:
Change of Directors/Other Directorship/Major Appointment
Mr. CHEN Shuang was appointed as the chairman and a non-executive director of Kinergy Corporation Ltd.,
which became a listed company on the Stock Exchange (Stock Code: 3302) on 17 July 2018.
Mr. FAN Yan Hok, Philip was appointed as a member of the Audit Committee of the Company with effect
from 9 May 2018.
Mr. GUO Zibin retired from the position of a non-executive Director with effect from the conclusion of the
2018 annual general meeting of the Company held on 9 May 2018 and resigned as a member of Audit
Committee of the Company on the same day.
Ms. CHEN Chia-Ling retired from the position of a non-executive Director with effect from the conclusion
of the 2018 annual general meeting of the Company held on 9 May 2018.
The updated biographies of Directors are available on the Company’s website.
Change of Directors’ Remuneration
The basic salary of Mr. POON Ho Man, an executive Director and the Chief Executive Officer of the Company,
has been increased from HK$1,542,000 to HK$2,160,000 per annum with effect from 1 April 2018.
The basic salary of Ms. LIU Wanting, an executive Director, has been increased from HK$2,640,000 to
HK$2,880,000 per annum with effect from 1 April 2018.
Since Mr. FAN Yan Hok, Philip has been appointed as a member of the Audit Committee of the Company with
effect with 9 May 2018, he is entitled to a pro-rata annual fee of HK$80,000 in 2018 for such appointment.
Save as disclosed above, the Company is not aware of other information which is required to be disclosed
under Rule 13.51B(1) of the Listing Rules.
Public FloatBased on the information publicly available to the Company and as far as the Directors are aware as at
the date of this report, at least 25% of the total issued share capital of the Company is held by the public
pursuant to the Listing Rules.
OTHER INFORMATION
China Aircraft Leasing Group Holdings Limited Interim Report 201826
OTHERS (continued)
Interim DividendThe Board has declared the payment of an interim dividend of HK$0.22 per Share in respect of the six
months ended 30 June 2018 (six months ended 30 June 2017: HK$0.18 per Share) to shareholders whose
names appear on the register of members of the Company on 12 September 2018. The interim dividend
will be paid on or about 26 September 2018.
Closure of Register of MembersFor the purpose of determining shareholders’ entitlement to the interim dividend, the register of members
of the Company will be closed from 11 September 2018 to 12 September 2018, both days inclusive, during
which period, no transfer of Shares will be registered. The record date on which the shareholders of the
Company are qualified to receive the interim dividend is 12 September 2018. In order to qualify for the
interim dividend, all properly completed transfer forms accompanied by the relevant share certificates must
be lodged with the Company’s Hong Kong branch share registrar and transfer office, Tricor Investor Services
Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, for registration not later than
4:30 p.m. on 10 September 2018.
Purchase, Sale or Redemption of the Company’s Listed SecuritiesThe Company repurchased a total of 437,000 ordinary shares of the Company at the highest price and
the lowest price per share of HK$7.99 and HK$7.92 respectively on the Stock Exchange for the six months
ended 30 June 2018 at an aggregate consideration of approximately HK$3,473,000 (before expense). All the
repurchased shares were subsequently cancelled on 13 July 2018 by the Company.
Save as disclosed above, during the six months ended 30 June 2018, neither the Company nor any of its
subsidiaries purchased, sold or redeemed any of the Company’s listed securities.
By order of the Board
China Aircraft Leasing Group Holdings Limited
POON HO MAN
Executive Director and Chief Executive Officer
Hong Kong, 24 August 2018
REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 27
TO THE BOARD OF DIRECTORS OF CHINA AIRCRAFT LEASING GROUP HOLDINGS LIMITED
(incorporated in Cayman Islands with limited liability)
INTRODUCTIONWe have reviewed the interim financial information set out on pages 28 to 80, which comprises the interim consolidated balance sheet of China Aircraft Leasing Group Holdings Limited (the “Company”) and its subsidiaries (together, the “Group”) as at 30 June 2018 and the interim consolidated statement of income, the interim consolidated statement of comprehensive income, the interim consolidated statement of changes in equity and interim consolidated statement of cash flows for the six months then ended, and a summary of significant accounting policies and other explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and Hong Kong Accounting Standard 34 “Interim Financial Reporting”. The directors of the Company are responsible for the preparation and presentation of this interim financial information in accordance with Hong Kong Accounting Standard 34 “Interim Financial Reporting”. Our responsibility is to express a conclusion on this interim financial information based on our review and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.
SCOPE OF REVIEWWe conducted our review in accordance with Hong Kong Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Hong Kong Institute of Certified Public Accountants. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
CONCLUSIONBased on our review, nothing has come to our attention that causes us to believe that the interim financial information of the Group is not prepared, in all material respects, in accordance with Hong Kong Accounting Standard 34 “Interim Financial Reporting”.
PricewaterhouseCoopersCertified Public Accountants
Hong Kong, 24 August 2018
INTERIM CONSOLIDATED BALANCE SHEET
China Aircraft Leasing Group Holdings Limited Interim Report 201828
Unaudited Audited
Note
As at30 June
2018
As at31 December
2017HK$’000 HK$’000
ASSETSProperty, plant and equipment 7 11,743,898 13,059,424Interests in and loans to associates 8 929,693 870,188Finance lease receivables – net 9 12,065,386 12,556,201Financial asset at fair value through profit or loss 10 146,167 –Derivative financial assets 20 174,722 90,835Prepayments and other assets 11 9,069,084 4,021,516Restricted cash 262,345 372,826Cash and cash equivalents 5,695,055 7,023,359
Total assets 40,086,350 37,994,349
EQUITYEquity attributable to shareholders of the CompanyShare capital 12 67,818 67,818Reserves and others 13 1,929,654 1,861,658Retained earnings 1,529,481 1,497,677
Total equity 3,526,953 3,427,153
LIABILITIESDeferred income tax liabilities 14 644,599 544,549Bank borrowings 15 15,593,820 16,458,411Long-term borrowings 16 5,368,725 5,329,396Medium-term notes 17 788,803 798,094Convertible bonds 18 – 153,190Bonds 19 8,584,180 8,538,932Derivative financial liabilities 20 – 207Income tax payables 8,940 17,254Interest payables 282,262 226,761Other liabilities and accruals 21 5,288,068 2,500,402
Total liabilities 36,559,397 34,567,196
Total equity and liabilities 40,086,350 37,994,349
The notes on page 34 and 80 form an integral part of this interim condensed consolidated financial information.
The interim condensed consolidated financial information was approved by the Board of Directors on
24 August 2018 and was signed on its behalf.
CHEN Shuang POON Ho Man
Director Director
INTERIM CONSOLIDATED STATEMENT OF INCOME
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 29
Unaudited
Six months ended 30 June
Note 2018 2017
HK$’000 HK$’000
Revenue
Finance lease income 22 432,421 540,621
Operating lease income 22 729,666 340,291
1,162,087 880,912
Net gain from aircraft transactions 23 243,021 289,587
Other income 24 207,008 87,551
1,612,116 1,258,050
Expenses
Interest expenses 25 (697,938) (614,647)
Depreciation 7 (289,907) (131,443)
Other operating expenses 26 (212,456) (157,850)
(1,200,301) (903,940)
Operating profit 411,815 354,110
Share of loss of an associate 8 – (5,548)
Other gains/(losses) 27 7,107 (5,740)
Profit before income tax 418,922 342,822
Income tax expenses 28 (111,077) (94,152)
Profit for the period 307,845 248,670
Profit attributable to shareholders of the Company 307,845 248,670
Earnings per share for profit attributable to shareholders of
the Company (expressed in HK$ per share)– Basic earnings per share 30(a) 0.454 0.370
– Diluted earnings per share 30(b) 0.454 0.368
The notes on page 34 and 80 form an integral part of this interim condensed consolidated financial
information.
INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
China Aircraft Leasing Group Holdings Limited Interim Report 201830
Unaudited
Six months ended 30 June
Note 2018 2017
HK$’000 HK$’000
Profit for the period 307,845 248,670
Other comprehensive income for the period:
Items that may be reclassified subsequently to profit or loss
Share of reserves of an associate – 5,389
Cash flow hedges 20 77,121 (15,709)
Currency translation differences 9,464 17,313
Total other comprehensive income for the period, net of tax 86,585 6,993
Total comprehensive income for the period 394,430 255,663
Total comprehensive income for the period attributable to
shareholders of the Company 394,430 255,663
The notes on page 34 and 80 form an integral part of this interim condensed consolidated financial
information.
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 31
UnauditedAttributable to shareholders of the Company
Sharecapital
Reservesand others
Retainedearnings
Totalequity
HK$’000 HK$’000 HK$’000 HK$’000
Balance as at 1 January 2017 66,990 1,839,694 1,136,662 3,043,346
Comprehensive incomeProfit for the period – – 248,670 248,670Other comprehensive incomeShare of reserves of an associate – 5,389 – 5,389Cash flow hedges (Note 20) – (15,709) – (15,709)Currency translation differences – 17,313 – 17,313
Total comprehensive income – 6,993 248,670 255,663
Transactions with shareholdersDividends (Note 29) – – (264,117) (264,117)Share option scheme:– Value of services (Note 12) – 9,472 – 9,472– Issue of new shares from exercise of share options 744 15,447 – 16,191Repurchase of convertible bonds (Note 18) – (18,582) 12,541 (6,041)
Total transactions with shareholders 744 6,337 (251,576) (244,495)
Balance as at 30 June 2017 67,734 1,853,024 1,133,756 3,054,514
Balance as at 31 December 2017 67,818 1,861,658 1,497,677 3,427,153Change in accounting policy (Note 4) – – (9,785) (9,785)
Restated balance as at 1 January 2018 67,818 1,861,658 1,487,892 3,417,368
Comprehensive incomeProfit for the period – – 307,845 307,845Other comprehensive incomeCash flow hedges (Note 20) – 77,121 – 77,121Currency translation differences – 9,464 – 9,464
Total comprehensive income – 86,585 307,845 394,430
Transactions with shareholdersDividends (Note 29) – – (284,837) (284,837)Buy-back of shares (Note 13(a)) – (3,487) – (3,487)Share option scheme:– Value of services (Note 12) – 3,472 – 3,472– Issue of new shares from exercise of share options (Note 12) – 7 – 7Transfer of reserves upon maturity of convertible bonds (Note 18) – (18,581) 18,581 –
Total transactions with shareholders – (18,589) (266,256) (284,845)
Balance as at 30 June 2018 67,818 1,929,654 1,529,481 3,526,953
The notes on page 34 and 80 form an integral part of this interim condensed consolidated financial
information.
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
China Aircraft Leasing Group Holdings Limited Interim Report 201832
Unaudited
Six months ended 30 June
2018 2017
HK$’000 HK$’000
Cash flows from operating activities
Profit after income tax 307,845 248,670
Adjustments for:– Depreciation 289,907 131,443– Net gain from aircraft transactions (243,021) (289,587)– Impairment loss of finance lease receivables 7,367 –
– Interest expenses 697,938 614,647– Share-based payments 3,472 9,472– Unrealised currency exchange (gains)/losses (3,714) 3,742– Fair value gains on interest rate and currency swaps (6,944) (4,600)– Loss on repurchase of convertible bonds – 3,055– Share of loss of an associate – 5,548– Interest income (51,911) (32,078)
1,000,939 690,312
Changes in working capital:– Finance lease receivables – net (453,622) 1,965,256– Prepayments and other assets (137,064) (67,354)– Other liabilities and accruals 266,501 528,041– Income tax payables (8,314) (34,758)– Deferred income tax liabilities 98,098 37,963
Net cash flows generated from operating activities 766,538 3,119,460
Cash flows from investing activities
Purchase of property, plant and equipment (2,887,579) (2,410,801)
Proceeds from disposal of lease-attached aircraft 1,610,645 –
Deposits paid for acquisition of aircraft (1,699,344) (1,476,328)
Deposits refunded for acquisition of aircraft 448,949 691,430
Interest received 7,142 19,631
Net payments relating to loans to an associate (14,736) (686,137)
Investment to financial asset at fair value through profit or loss (146,167) –
Net cash flow used in investing activities (2,681,090) (3,862,205)
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 33
Unaudited
Six months ended 30 June
Note 2018 2017
HK$’000 HK$’000
Cash flows from financing activities
Proceeds from issue of new shares from exercise of share options 12 7 16,191
Proceeds from bank borrowings and long-term borrowings 6,190,894 4,908,856
Proceeds from termination of derivative financial instruments – 32,025
Issue of bonds, net of transaction costs – 3,857,191
Refinancing and repayments of bank borrowings and long-term
borrowings (4,561,262) (6,374,125)
Repurchase or repayment of convertible bonds, including
transaction costs (155,160) (156,899)
Interest received/(paid) in respect of derivative financial
instruments 1,666 (15,019)
Interest paid in respect of borrowings, notes and bonds (720,494) (574,658)
Decrease in deposits pledged in respect of borrowings 103,054 19,254
Decrease/(Increase) in deposits pledged in respect of derivative
financial instruments 4,911 (356)
Buy-back of shares, including transaction costs 13(a) (3,487) –
Dividends paid to shareholders (284,837) (263,294)
Net cash flows generated from financing activities 575,292 1,449,166
Net (decrease)/increase in cash and cash equivalents (1,339,260) 706,421
Cash and cash equivalents at beginning of the period 7,023,359 5,840,746
Currency exchange difference on cash and cash equivalents 10,956 54,760
Cash and cash equivalents at end of the period 5,695,055 6,601,927
The notes on page 34 and 80 form an integral part of this interim condensed consolidated financial
information.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
China Aircraft Leasing Group Holdings Limited Interim Report 201834
1 GENERAL INFORMATIONThe Company was incorporated in the Cayman Islands on 21 December 2012 as an exempted company
with limited liability under the Companies Law (2012 Revision) of the Cayman Islands. The address of
the Company’s registered office is Maples Corporate Services Limited, P.O. Box 309, Ugland House,
Grand Cayman KY1-1104, Cayman Islands. The Company’s shares have been listed on the Main Board
of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) since 11 July 2014 (the “Listing”).
The Company is an investment holding company and its subsidiaries are principally engaged in the
aircraft leasing business. The Company and its subsidiaries (together, “the Group”) have operations
mainly in Mainland China and other countries or regions in Europe and Asia.
The interim condensed consolidated financial information for the six months ended 30 June 2018
(“Interim Financial Information”) is presented in Hong Kong Dollar (“HK$”), unless otherwise stated.
The Interim Financial Information has been reviewed, not audited.
2 BASIS OF PREPARATIONThe Interim Financial Information has been prepared in accordance with Hong Kong Accounting
Standard 34 (“HKAS 34”) “Interim financial reporting”. The Interim Financial Information should be read
in conjunction with the Group’s financial statements for the year ended 31 December 2017, which have
been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRS”) and included
in the 2017 annual report of the Company.
(a) Going concernAircraft leasing is a capital-intensive business. As at 30 June 2018, the Group’s current liabilities
exceeded its current assets by HK$2,012.0 million. The Group had total capital commitments of
HK$83,744.9 million mainly relating to acquisition of aircraft (Note 32(b)), of which HK$11,475.3
million is payable within one year. The Group will satisfy these capital commitments through the
Group’s internal resources and may need to raise additional funds through pre-delivery payments
(“PDP”) financing, new commercial aircraft bank loans, issuance of notes under the US$3,000
million medium-term note programme set up in December 2017 (“MTN Programme”), other debt
and capital financing, and disposal of finance lease receivables and/or disposal of aircraft. In view
of such circumstances, the directors of the Company have given due and careful consideration
to the liquidity of the Group and its available sources of financing in assessing whether the
Group will have sufficient financial resources to fulfil its financial obligations and its capital
commitments; and thus its ability to continue as a going concern. The directors of the Company
adopted a going concern basis in preparing the consolidated financial statements based on the
following assessments:
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 35
2 BASIS OF PREPARATION (continued)
(a) Going concern (continued)
– According to the relevant aircraft purchase agreements, PDP scheduled to be paid in the next
twelve months from 30 June 2018 amounted to HK$4,042.9 million. Up to the approval date
of the consolidated financial statements, the Group had signed PDP financing agreements
and term sheets with various commercial banks which have agreed to provide financing of
HK$1,603.7 million to the Group in the next twelve months from 30 June 2018. The remaining
balance of PDP amounting to HK$2,439.2 million is to be funded by internal resources,
available banking facilities or additional financing.
– The new commercial aircraft bank borrowings are primarily used for the PDP financing and
aircraft acquisition cost. Such aircraft acquisition borrowing will only be confirmed before
delivery of the relevant aircraft and based on industry practice and prior experience, long-
term aircraft borrowings will be granted by the banks if the aircraft can be leased out to
airline companies. Lease agreements or letters of intent have already been signed for the
aircraft scheduled for delivery in the next twelve months from 30 June 2018. The directors
of the Company thus believes that long-term aircraft borrowings can be obtained or other
internal resources, issuing bonds and available banking facilities can be used to settle the
PDP financing and the balance payments of the aircraft acquisition costs due in the next
twelve months from 30 June 2018.
– For the existing long-term aircraft borrowings, under the business model of the Group, the
expected cash inflows from lease receivables generally are sufficient for the required cash
outflows for instalment repayments of the long-term aircraft borrowings over the entire
lease term of the aircraft.
– As at 30 June 2018, the Group had cash and cash equivalents amounting to HK$5,695.1
million. In addition, the Group set up the MTN Programme of US$3,000 million in December
2017, pursuant through which the Group may raise necessary funds as when needed. Each
issuance of the note from such MTN Programme will be subject to the board of directors’
approval and other external factors.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
China Aircraft Leasing Group Holdings Limited Interim Report 201836
2 BASIS OF PREPARATION (continued)
The directors of the Company have reviewed the Group’s cash flow forecasts prepared by management,
covering a period of not less than twelve months from 30 June 2018. The forecasts are based on a
number of assumptions including aircraft delivery and leasing schedules, planned disposal of finance
lease receivables and/or disposal of aircraft, internal resources, available banking facilities that have
been granted or will be granted, other available sources of financing, and the amount of capital
commitments.
On this basis, the directors of the Company are of the opinion that, the Group expects to have sufficient
working capital to finance its operations and to meet its financial obligations, including those capital
commitments in the next twelve months from 30 June 2018. Accordingly, the directors of the Company
consider that the Group will be in a position to continue as a going concern and have prepared the
consolidated financial statements on a going concern basis.
3 ACCOUNTING POLICIESExcept as described below, the accounting policies applied are consistent with those of the Group’s
consolidated financial statements for the year ended 31 December 2017.
3.1 Changes in accounting policy and disclosure (a) New and amended standards adopted by the Group
The following amendments to standards have been adopted by the Group for the first time
for the financial year beginning on or after 1 January 2018:
HKFRS 9, ‘Financial instruments’
HKFRS 15, ‘Revenue from contracts with customers’
Amendments to HKFRS 2, ‘Classification and measurement of share-based payment transactions’
Amendment to HKAS 28, ‘Investments in associates and joint ventures’
HK (IFRIC) 22, ‘Foreign currency transactions and advance consideration’
The impact of adoption of HKFRS 9 is disclosed in note 4 below. Other new and revised
HKFRSs did not have a material impact on the Group’s accounting policies and did not
require retrospective adjustments.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 37
3 ACCOUNTING POLICIES (continued)
3.1 Changes in accounting policy and disclosure (continued)
(b) New standards and interpretations not yet adopted
A number of new standards and amendments to standards and interpretations are effective
for annual periods beginning after 1 January 2018 and have not been early applied in
preparing these consolidated financial statements. None of these is expected to have a
material impact on the consolidated financial statements of the Group, except the following
set out below:
HKFRS 16, ‘Leases’
HKFRS 16 was issued in January 2016. HKFRS 16 will result in virtually all leases being
recognised on the balance sheet for the lessees, as the distinction between operating and
finance leases is removed. Under the new standard, an asset (the right to use the leased
item) and a financial liability to pay rentals are recognised. The only exceptions are short-
term and low-value leases.
The accounting for lessors will not significantly change.
The standard will affect primarily the accounting for the Group’s operating leases. As at
30 June 2018, the Group has non-cancellable operating lease commitments of HK$22.3
million, see Note 32(c). However, the Group has not yet determined to what extent these
commitments will result in the recognition of an asset and a liability for future payments
and how this will affect the Group’s profit and classification of cash flows.
The new standard is mandatory for financial years commencing on or after 1 January 2019.
At this stage, the Group does not intend to adopt the standard before its effective date.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
China Aircraft Leasing Group Holdings Limited Interim Report 201838
3 ACCOUNTING POLICIES (continued)
3.2 New accounting policy adopted by the Group during the six months end 30 June 2018 Non-current assets (or disposal group) held for sale
Non-current assets (or disposal group) are classified as held for sale if their carrying amount will
be recovered principally through a sale transaction rather than through continuing use and a sale
is considered highly probable. They are measured at the lower of their carrying amount and fair
value less costs to sell, except for assets such as deferred tax assets, assets arising from employee
benefits, financial assets and investment property that are carried at fair value and contractual
rights under insurance contracts, which are specifically exempt from this requirement.
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal
group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value
less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment
loss previously recognised. A gain or loss not previously recognised by the date of the sale of the
non-current asset (or disposal group) is recognised at the date of derecognition.
Non-current assets (including those that are part of a disposal group) are not depreciated or
amortised while they are classified as held for sale. Interest and other expenses attributable to
the liabilities of a disposal group classified as held for sale continue to be recognised.
4 CHANGES IN ACCOUNTING POLICYThis note explains the impact of the adoption of HKFRS 9, ‘Financial Instruments’ on the Group’s
consolidated financial statements and also discloses the new accounting policy that have been applied
from 1 January 2018, where it is different to that applied in prior periods.
(a) Impact on the consolidated financial statementsHKFRS 9 replaces the provisions of HKAS 39 that relate to the recognition, classification and
measurement of financial assets and financial liabilities, derecognition of financial instruments,
impairment of financial assets and hedge accounting.
The adoption of HKFRS 9, ‘Financial Instruments’ from 1 January 2018 resulted in changes in
accounting policies and adjustments to the amounts recognised in the consolidated financial
statements. The new accounting policy is set out in note 4(b) below. In accordance with the
transitional provisions in HKFRS 9, comparative figures have not been restated. There was no
significant impact on the classification and measurements of the Group’s financial assets and
financial liabilities at the date of initial application of HKFRS 9. The adjustments arising from
the new impairment rules are therefore not reflected in the consolidated balance sheet as at
31 December 2017, but are recognised in the opening balance sheet on 1 January 2018.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 39
4 CHANGES IN ACCOUNTING POLICY (continued)
(a) Impact on the consolidated financial statements (continued)
Consolidated financial statement items
As at
31 December
2017
As originally
presented
Increase in
provision for
finance lease
receivables
As at
1 January
2018
Restated
HK$’000 HK$’000 HK$’000
ASSETS
Finance lease receivables – net 12,556,201 (9,909) 12,546,292
LIABILITIES
Deferred income tax liabilities 544,549 (124) 544,425
EQUITY
Retained earnings 1,497,677 (9,785) 1,487,892
(b) HKFRS 9 Financial Instruments – Impact of accounting policy applied from 1 January 2018
(i) Investments and other financial assets
Classification
From 1 January 2018, the Group classifies its financial assets in the following measurement
categories:
• those to be measured subsequently at fair value (either through other comprehensive
income, or through profit or loss), and
• those to be measured at amortised cost.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
China Aircraft Leasing Group Holdings Limited Interim Report 201840
4 CHANGES IN ACCOUNTING POLICY (continued)
(b) HKFRS 9 Financial Instruments – Impact of accounting policy applied from 1 January 2018 (continued)
(i) Investments and other financial assets (continued)
Classification (continued)
The classification depends on the entity’s business model for managing the financial assets
and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss
or other comprehensive income. For investments in equity instruments that are not held for
trading, this will depend on whether the Group has made an irrevocable election at the
time of initial recognition to account for the equity investment at fair value through other
comprehensive income (”FVOCI”).
The Group reclassifies debt investments when and only when its business model for managing
those assets changes.
Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case
of a financial asset not at fair value through profit or loss (“FVPL”), transaction costs that
are directly attributable to the acquisition of the financial asset. Transaction costs of financial
assets carried at FVPL are expensed in profit or loss.
Financial assets with embedded derivatives are considered in their entirety when determining
whether their cash flows are solely payment of principal and interest.
Debt instruments
Subsequent measurement of debt instruments depends on the Group’s business model
for managing the asset and the cash flow characteristics of the asset. There are three
measurement categories into which the Group classifies its debt instruments:
• Amortised cost: Assets that are held for collection of contractual cash flows where
those cash flows represent solely payments of principal and interest are measured at
amortised cost. Interest income from these financial assets is included in finance income
using the effective interest rate method. Any gain or loss arising on derecognition is
recognised directly in profit or loss and presented in other gains/(losses), together with
foreign exchange gains and losses. Impairment losses are presented as separate line
item in the statement of income.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 41
4 CHANGES IN ACCOUNTING POLICY (continued)
(b) HKFRS 9 Financial Instruments – Impact of accounting policy applied from 1 January 2018 (continued)
(i) Investments and other financial assets (continued)
Debt instruments (continued)
• FVOCI: Assets that are held for collection of contractual cash flows and for selling the
financial assets, where the assets’ cash flows represent solely payments of principal and
interest, are measured at FVOCI. Movements in the carrying amount are taken through
other comprehensive income, except for the recognition of impairment gains or losses,
interest revenue and foreign exchange gains and losses which are recognised in profit
or loss. When the financial asset is derecognised, the cumulative gain or loss previously
recognised in other comprehensive income is reclassified from equity to profit or loss
and recognised in other gains/(losses). Interest income from these financial assets is
included in finance income using the effective interest rate method. Foreign exchange
gains and losses are presented in other gains/(losses) and impairment expenses are
presented as separate line item in the statement of income.
• FVPL: Assets that do not meet the criteria for amortised cost or FVOCI are measured
at FVPL. A gain or loss on a debt investment that is subsequently measured at FVPL is
recognised in profit or loss and presented net within other gains/(losses) in the period
in which it arises.
Equity instruments
The Group subsequently measures all equity investments at fair value. Where the Group’s
management has elected to present fair value gains and losses on equity investments in
other comprehensive income, there is no subsequent reclassification of fair value gains and
losses to profit or loss following the derecognition of the investment. Dividends from such
investments continue to be recognised in profit or loss as other income when the Group’s
right to receive payments is established.
Changes in the fair value of financial assets at FVPL are recognised in other gains/(losses)
in the statement of income as applicable. Impairment losses (and reversal of impairment
losses) on equity investments measured at FVOCI are not reported separately from other
changes in fair value.
Impairment
From 1 January 2018, the Group assesses on a forward looking basis the expected credit losses
associated with its debt instruments carried at amortised cost. The impairment methodology
applied depends on whether there has been a significant increase in credit risk.
For finance lease receivables and other receivables, the Group applies the simplified approach
permitted by HKFRS 9, which requires expected lifetime losses to be recognised from initial
recognition of the finance lease receivables and other receivables.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
China Aircraft Leasing Group Holdings Limited Interim Report 201842
4 CHANGES IN ACCOUNTING POLICY (continued)
(b) HKFRS 9 Financial Instruments – Impact of accounting policy applied from 1 January 2018 (continued)
(ii) Derivatives and hedging
Cash flow hedges that qualify for hedge accounting
The effective portion of changes in the fair value of derivatives that are designated and
qualify as cash flow hedges is recognised in the cash flow hedges reserve within equity. The
gain or loss relating to the ineffective portion is recognised immediately in profit or loss,
within other gains/(losses).
Amounts accumulated in equity are reclassified in the periods when the hedged item affects
profit or loss, as follows:
• Where the hedged item subsequently results in the recognition of a non-financial asset,
both the deferred hedging gains and losses, if any, are included within the initial cost
of the asset. The deferred amounts are ultimately recognised in profit or loss as the
hedged item affects profit or loss.
• The gain or loss relating to the effective portion of the interest rate swaps hedging
variable rate borrowings is recognised in profit or loss within finance cost at the same
time as the interest expense on the hedged borrowings.
When a hedging instrument expires, or is sold or terminated, or when a hedge no longer
meets the criteria for hedge accounting, any cumulative deferred gain or loss and deferred
costs of hedging in equity at that time remains in equity until the forecast transaction occurs,
resulting in the recognition of a non-financial asset such as inventory. When the forecast
transaction is no longer expected to occur, the cumulative gain or loss and deferred costs
of hedging that were reported in equity are immediately reclassified to profit or loss.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 43
5 ESTIMATESThe preparation of Interim Financial Information requires management to make judgements, estimates
and assumptions that affect the application of accounting policies and the reported amounts of assets
and liabilities, income and expense. Actual results may differ from these estimates.
In preparing the Interim Financial Information, the significant judgements made by management
in applying the Group’s accounting policies and the key sources of estimation uncertainty were
consistent with those that applied to the Group’s consolidated financial statements for the year ended
31 December 2017 except for impairment of financial assets disclosed in note 4.
6 FINANCIAL RISK MANAGEMENT 6.1 Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk (including foreign
exchange risk and interest rate risk), credit risk and liquidity risk. The Group’s aim is therefore
to achieve an appropriate balance between risk and return and minimise the potential adverse
effects on the Group’s financial performance.
The Interim Financial Information does not include all financial risk management information and
disclosures required in the annual financial statements, and should be read in conjunction with
the Group’s consolidated financial statements for the year ended 31 December 2017.
Except for the impairment allowance policies (Note 6.1.2(c)), there have been no significant changes
in the risk management department or in any risk management policies since 31 December 2017.
6.1.1 Market risk
(a) Currency exchange risk
In the normal course of business, the Group is exposed to currency exchange risks as
certain portion of cash and cash equivalents, financial assets including finance lease
receivables, prepayments and other assets, financial liabilities including borrowings,
other liabilities and accruals held by the Group are denominated in currencies other
than functional currency of the Group entities. The aircraft leasing income and the
corresponding borrowings used to finance the leases are mainly denominated in US$.
Currency exchange risk may arise when the finance lease receivables and corresponding
borrowings are denominated in different currencies. The management minimises the
currency exchange risk by matching the finance lease receivables and borrowings under
the same currency and considers hedging significant currency exchange exposure where
necessary and appropriate.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
China Aircraft Leasing Group Holdings Limited Interim Report 201844
6 FINANCIAL RISK MANAGEMENT (continued)
6.1 Financial risk factors (continued)
6.1.1 Market risk (continued)
(b) Cash flow and fair value interest rate risk
Finance lease receivables and bank borrowings at floating rates expose the Group to
cash flow interest rate risk. Finance lease receivables, bank borrowings, bonds and
medium-term notes at fixed rates expose the Group to fair value interest rate risk.
The Group’s primary objective is to manage cash flow interest rate risk.
The Group manages the cash flow interest rate risk by matching the rental rates of
aircraft leases with interest rates of bank borrowings. Interest rate exposure arises when
rental rates of the leases and the interest rates of corresponding bank borrowings
do not match. As at 30 June 2018, the Group had 22 outstanding floating-to-fixed
interest rate swaps (31 December 2017: 22 swaps) to manage its unmatched interest
rate risk exposure. Such interest rate swaps have the economic effect of converting
bank borrowings from floating rates to fixed rates. Under the interest rate swaps, the
Group agrees with other parties to exchange, at specified intervals (primarily quarterly),
the difference in the amount of interest between the fixed rate and the floating rate
calculated by reference to the agreed notional amounts. For the remaining unhedged
exposure, the Group closely monitors the interest rate trend and may consider hedging
the exposure where necessary and appropriate.
The Group performs sensitivity analysis by measuring the impact of a change in
interest rates as at 30 June 2018. It is estimated that a general increase/decrease of
50 basis points in interest rates, with all other variables held constant, would have
decreased/increased the Group’s profit before tax for the six months ended 30 June
2018 by approximately HK$20,210,000 (six months ended 30 June 2017: increased/
decreased by HK$3,539,000); and would also have increased/decreased the Group’s
reserves by approximately HK$75,074,000 (31 December 2017: increased/decreased by
HK$88,832,000) because of the impact of cash flow hedge interest derivatives.
The sensitivity analysis above indicates the impact on the Group’s lease income and
interest expense that would arise assuming that the change in interest rates had
occurred at the balance sheet date and had been applied to the exposure to interest
rate risk for financial instruments in existence at that date. The 50 basis point change
represents management’s assessment of a reasonably possible change in interest rates
over the period until the next annual balance sheet date.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 45
6 FINANCIAL RISK MANAGEMENT (continued)
6.1 Financial risk factors (continued)
6.1.2 Credit risk
The Group takes on exposure to credit risk, which is the risk that counterparty will cause
a financial loss for the Group by failing to discharge an obligation. Significant changes in
economy, or in the health of the industry segment that represents a concentration in the
Group’s portfolio (see (d) below), could result in losses that are different from those provided
for at the balance sheets date. The Group therefore carefully manages its exposure to credit
risk. Credit exposures of the Group arise principally in aircraft leasing service.
The Group implements its industry risk management system according to its plan based on
actual situation with focus on industry research, counterparty credit rating, and understanding
of the lessee’s operations, financial condition as well as their shareholders’ support. The
Group also obtained deposits from the lessees (Note 21). All these strengthen the control
and management of credit risk.
The Group is also exposed to credit risk associated with its interest rate swaps arrangement
with four banks, which has a high credit quality.
(a) Probability of default
Default risk – in the event of default, the Group may demand return of aircraft,
repossession of aircraft or disposal of aircraft, whenever appropriate. In addition, the
Group may request for a security deposit or security deposit letter of credit which it
may apply towards the payment or discharge of any obligation owed by the lessee.
(b) Risk limit control and mitigation policies
The Group manages, limits and controls concentrations of credit risk wherever they are
identified, in particular, to assess the lessees’ repayment ability periodically.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
China Aircraft Leasing Group Holdings Limited Interim Report 201846
6 FINANCIAL RISK MANAGEMENT (continued)
6.1 Financial risk factors (continued)
6.1.2 Credit risk (continued)
(c) Impairment allowance policies
The Group applies the simplified approach on measuring expected credit losses
prescribed by HKFRS 9, which uses the lifetime expected loss provision for finance lease
receivables and other receivables. To measure the expected credit losses, the relevant
receivables are grouped based on shared credit risk characteristics such as financial
performance and stability, future growth, default history and other relevant factors. The
loss allowances are based on assumptions about risk of default and expected loss rates.
The Group uses judgement in making these assumptions and selecting the inputs to the
impairment calculation, based on the Group’s past history, existing market conditions
as well as forward looking estimates at the end of each reporting period.
(d) Concentration of credit risk
During the six months ended 30 June 2018, the lessees of the Group are airline
companies located in the United States, Mainland China and other countries or regions
in Europe, Asia and South America. Please see Note 9 and Note 22 for an analysis of
lease receivables and lease income by airline companies. If any of them experiences
financial difficulties, the recovery of the Group’s finance lease receivables through
regular lease payments might be adversely affected and the Group may have to resort
to recovery through repossession of the leased asset.
To manage this risk, the Group assesses the business performance of the airline
companies on a regular basis. In view of the fact that the airline companies are
operating smoothly and the sound collection history of the receivable due from them,
management believes that the credit risk inherent in the Group’s outstanding finance
lease receivable balances (Note 9) and operating lease receivables (Note 32(d)) from
these airline companies is insignificant.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 47
6 FINANCIAL RISK MANAGEMENT (continued)
6.1 Financial risk factors (continued)
6.1.3 Liquidity risk
The following table sets forth the assets and liabilities of the Group which are expected to
be recovered or due to be settled within twelve months after the balance sheet date:
Unaudited Audited
As at
30 June
2018
As at
31 December
2017
HK$’000 HK$’000
Current assets
Loans to an associate 929,693 870,188
Finance lease receivables – net 13,608 25,453
Derivative financial assets 41,907 5,587
Prepayments and other assets 3,718,903 347,297
Cash and cash equivalents 5,695,055 7,023,359
10,399,166 8,271,884
Current liabilities
Deferred income tax liabilities 80,744 79,126
Bank borrowings 4,988,949 5,306,682
Long-term borrowings 84,612 89,190
Convertible bonds – 153,190
Bonds 2,353,590 –
Derivative financial liabilities – 414
Income tax payables 8,940 17,254
Interest payables 282,262 226,761
Other liabilities and accruals 4,612,030 1,708,174
12,411,127 7,580,791
Net current (liabilities)/assets (2,011,961) 691,093
The assets and liabilities of the Group not included in the above table are expected to be
recovered or due to be settled more than twelve months after the balance sheet date.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
China Aircraft Leasing Group Holdings Limited Interim Report 201848
6 FINANCIAL RISK MANAGEMENT (continued)
6.2 Capital risk managementThe Group’s objectives when managing capital are to safeguard the Group’s ability to continue as
a going concern in order to provide returns for shareholders and benefits for other stakeholders
and to maintain an optimal capital structure to enhance shareholders’ value in the long term.
The Group manages its capital structure and makes adjustments to it, in light of changes in economic
conditions. To maintain or adjust the capital structure, the Group may issue new shares, raise new
debts, or adjust the amount of dividend paid to shareholders. No changes were made to the objectives,
policies or processes for managing capital during the six months ended 30 June 2018.
The Group monitors capital risk using gearing ratio, which is calculated as interest-bearing debts
included in total liabilities divided by total assets, and asset-liability ratio, which is calculated as
total liabilities divided by total assets. The ratios are as follows:
Unaudited AuditedAs at
30 June 2018
As at 31 December
2017HK$’000 HK$’000
Interest-bearing debts included in total liabilities 32,902,002 31,278,023Total liabilities 36,559,397 34,567,196Total assets 40,086,350 37,994,349
Gearing ratio 82.1% 82.3%Asset-liability ratio 91.2% 91.0%
6.3 Fair value estimationFair value refers to the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. Regarding financial
instruments, for which there is an active market, the Group employs the quotations in the active
market to determine the fair value thereof. If there is no active market for an instrument, the
Group estimates fair value using valuation techniques, which include discounted cash flow analysis.
Financial instruments carried at fair value are measured using different valuation techniques. The
inputs to valuation techniques used are categorised into three levels within a fair value hierarchy
as follows:
• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
• Inputs other than quoted prices included within level 1 that are observable for the asset or
liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).
• Inputs for the asset or liability that are not based on observable market data (that is,
unobservable inputs) (level 3).
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 49
6 FINANCIAL RISK MANAGEMENT (continued)
6.3 Fair value estimation (continued)
Financial assets and financial liabilities measured at fair values
The following table presents the Group’s financial assets and financial liabilities that were
measured at fair values.
Level 1 Level 2 Level 3 Total
HK$’000 HK$’000 HK$’000 HK$’000
As at 30 June 2018 – unaudited
Assets
Currency swap – 12,577 – 12,577
Interest rate swaps – 162,145 – 162,145
Financial asset at fair value through
profit or loss – – 146,167 146,167
– 174,722 146,167 320,889
As at 31 December 2017 – audited
Assets
Currency swap – 14,966 – 14,966
Interest rate swaps – 75,869 – 75,869
– 90,835 – 90,835
Liabilities
Interest rate swaps – 207 – 207
The fair values of the interest rate swaps for hedging and the currency swap are determined by
using valuation techniques, mainly discounted cash flow analysis. The Group uses its judgements to
select the appropriate methods and makes assumptions that are mainly based on market conditions
existing at the end of each reporting period. The inputs to the valuation models, including yield
curves, US$/RMB forward rates, are observable either directly or indirectly and thus their fair
values are considered to be of level 2 within the fair value hierarchy.
The fair value of the financial asset at fair value through profit or loss is also determined by
making reference to discounted cash flow analysis. The Group uses the significant unobservable
inputs to the valuation model including the earnings growth factor, risk-adjusted discount rate
and other relevant factors. Thus the fair value is considered to be of level 3 within the fair value
hierarchy.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
China Aircraft Leasing Group Holdings Limited Interim Report 201850
6 FINANCIAL RISK MANAGEMENT (continued)
6.3 Fair value estimation (continued)
The following table presents the change in level 3 instrument for the six months ended 30 June
2018.
Financial asset
at fair value
through profit
or loss
HK$’000
As at 31 December 2017 and 1 January 2018 –
Addition on 29 June 2018 146,167
As at 30 June 2018 146,167
Financial assets and financial liabilities carried at amortised cost
The fair values of cash and cash equivalents, other receivables, loans to an associate, interest
payables and other payables approximate their carrying amounts because these financial assets and
liabilities, which are short term in nature, mature within one year, are not sensitive to changes
in inputs to valuation techniques.
The carrying amounts and fair values of the finance lease receivables, bank and long-term
borrowings, medium-term notes, convertible bonds and bonds are as follows:
Unaudited Audited
As at 30 June 2018 As at 31 December 2017
Carrying
amount Fair value
Carrying
amount Fair value
HK$’000 HK$’000 HK$’000 HK$’000
Finance lease receivables – net 12,065,386 12,468,437 12,556,201 13,270,358
Bank borrowings 15,593,820 15,818,365 16,458,411 16,490,975
Bank borrowings directly associated
with assets classified as held for sale 2,566,474 2,693,332 – –
Long-term borrowings 5,368,725 5,750,053 5,329,396 5,528,775
Medium-term notes 788,803 821,496 798,094 808,874
Convertible bonds – – 153,190 158,050
Bonds 8,584,180 8,446,485 8,538,932 8,819,974
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 51
6 FINANCIAL RISK MANAGEMENT (continued)
6.3 Fair value estimation (continued)
The fair values of finance lease receivables, borrowings, medium-term notes and convertible bonds
are estimated by discounting the future cash flows at the current market rates available to the
Group for similar financial instruments. Their fair values are considered to be of level 2 within
the fair value hierarchy.
The fair values of bonds are the quoted price in the active market. Their fair values are considered
to be of level 1 within the fair value hierarchy.
7 PROPERTY, PLANT AND EQUIPMENT
Unaudited
AircraftLeasehold
improvementsOffice
equipment Building Others TotalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Net book value as at 31 December 2017 and 1 January 2018 13,041,381 1,295 3,584 – 13,164 13,059,424
Additions 2,853,612 623 580 43,707 762 2,899,284Transfer from finance lease receivables 1,005,387 – – – – 1,005,387Assets included in a disposal group
classified as held for sale and other disposal (Note 11(b)) (4,977,842) – – – – (4,977,842)
Depreciation (287,358) (504) (898) (365) (782) (289,907)Currency translation difference 47,519 (11) (2) 45 1 47,552
Net book value as at 30 June 2018 11,682,699 1,403 3,264 43,387 13,145 11,743,898
Net book value as at 1 January 2017 6,207,533 1,995 4,575 – – 6,214,103Additions 2,447,138 – 347 – – 2,447,485Depreciation (130,054) (442) (947) – – (131,443)Currency translation difference 55,279 11 14 – – 55,304
Net book value as at 30 June 2017 8,579,896 1,564 3,989 – – 8,585,449
Lease rentals amounting to HK$729,666,000 relating to the lease of aircraft for the six months ended
30 June 2018 are included in “operating lease income” in the consolidated statement of income (six
months ended 30 June 2017: HK$340,291,000).
As at 30 June 2018, the net book value of aircraft under operating leases amounting to HK$7,685,652,000
(31 December 2017: HK$8,679,902,000) were pledged as collateral for bank borrowings for aircraft
acquisition financing (Note 15) and borrowings from trust plans (Note 16).
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
China Aircraft Leasing Group Holdings Limited Interim Report 201852
8 INTERESTS IN AND LOANS TO ASSOCIATES
Unaudited Audited
As at
30 June
2018
As at
31 December
2017
HK$’000 HK$’000
Interests in and loans to associates 929,693 870,188
Unaudited
Six months ended 30 June
2018 2017
HK$’000 HK$’000
Share of loss of an associate – (5,548)
As at 30 June 2018, the Group had direct interests in the following principal associate:
Name of entity
Country of
incorporation
% of
ownership
interest
Measurement
method
Aircraft Recycling International Limited
(“ARI”)
Cayman Islands 48% Equity
ARI is an investment holding company and its subsidiaries have operations mainly in the Mainland
China, United States and other countries and are principally engaged in providing asset management
services and comprehensive solutions for dealing with second lease and mid-life to mature aircraft. As at
30 June 2018, the Group’s outstanding loans balance receivable from ARI amounted to HK$929,693,000
(31 December 2017: HK$870,188,000).
Pursuant to the shareholders’ loan agreement dated 6 April 2016, the loans to ARI are secured by
pledge of shares in a subsidiary of ARI, bearing interest at 4% per annum above the prime lending
rate quoted by the Bank of China (Hong Kong) Limited which is accrued daily and payable in arrears
at six-monthly intervals from the date of issue of the loan note. The loan is repayable on demand.
There are no contingent liabilities relating to the Group’s interests in the associates. As the results of
the associates are not material to the Group, no summarised financial information of the associates
is disclosed.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 53
9 FINANCE LEASE RECEIVABLES – NET
Unaudited Audited
As at
30 June
2018
As at
31 December
2017
HK$’000 HK$’000
Finance lease receivables 6,261,732 7,139,331
Guaranteed residual values 6,378,219 6,519,844
Unguaranteed residual values 7,062,097 7,284,728
Gross investment in leases 19,702,048 20,943,903
Less: Unearned finance income (7,619,340) (8,387,702)
Net investment in leases 12,082,708 12,556,201
Less: Accumulated allowance for impairment (17,322) –
Finance lease receivables – net 12,065,386 12,556,201
Reconciliation between the gross investment in finance leases at the end of each reporting period
and the present value of minimum lease payments receivable under such leases at the end of each
reporting period is set out below.
Unaudited Audited
As at
30 June
2018
As at
31 December
2017
HK$’000 HK$’000
Gross investment in finance leases 19,702,048 20,943,903
Less: Unguaranteed residual values (7,062,097) (7,284,728)
Minimum lease payments receivable 12,639,951 13,659,175
Less: Unearned finance income related to minimum lease payments
receivable (4,478,626) (4,996,644)
Present value of minimum lease payments receivable 8,161,325 8,662,531
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
China Aircraft Leasing Group Holdings Limited Interim Report 201854
9 FINANCE LEASE RECEIVABLES – NET (continued)
The table below analyses the Group’s gross investment in finance leases by relevant maturity groupings
at the end of each reporting period:
Unaudited Audited
As at
30 June
2018
As at
31 December
2017
HK$’000 HK$’000
Gross investment in finance leases– Not later than 1 year 798,917 851,211– Later than 1 year and not later than 5 years 3,228,416 3,557,303– Later than 5 years 15,674,715 16,535,389
19,702,048 20,943,903
The table below analyses the present value of minimum lease payments receivable under finance leases
by relevant maturity groupings at the end of each reporting period:
Unaudited Audited
As at
30 June
2018
As at
31 December
2017
HK$’000 HK$’000
Present value of minimum lease payments receivable– Not later than 1 year 285,062 298,044– Later than 1 year and not later than 5 years 721,504 863,357– Later than 5 years 7,154,759 7,501,130
8,161,325 8,662,531
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 55
9 FINANCE LEASE RECEIVABLES – NET (continued)
The following table sets forth the finance lease receivables attributable to airlines companies:
Unaudited Audited
As at 30 June 2018 As at 31 December 2017
HK$’000 % HK$’000 %
Categorised by customer in terms of lease
receivables:
Five largest airline companies 9,083,138 75% 9,314,147 74%
Other airline companies 2,982,248 25% 3,242,054 26%
Finance lease receivables – net 12,065,386 100% 12,556,201 100%
10 FINANCIAL ASSET AT FAIR VALUE THROUGH PROFIT OR LOSS
Unaudited Audited
As at
30 June
2018
As at
31 December
2017
HK$’000 HK$’000
Long term debt investments 146,167 –
CAG Bermuda 1 Limited (“CAG”) and its subsidiaries (collectively as “CAG Group”) are principally
engaged in lease-attached aircraft portfolio investment. CAG uses the fund injected through the
shareholder’s loan from the Group and the mezzanine financing from other investors at a ratio of
20% to 80%, together with a shareholding between the Group and other investors at the same ratio.
Pursuant to shareholders’ agreement and shareholder loan agreement, all investors of CAG committed
to invest in CAG through shareholder loans according to the shareholding proportion. The Group’s
committed shareholder loan is approximately US$73.0 million (equivalent to approximately HK$572.7
million), of which US$18.6 million (equivalent to approximately HK$146.2 million) had been drawn
down up to 30 June 2018.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
China Aircraft Leasing Group Holdings Limited Interim Report 201856
11 PREPAYMENTS AND OTHER ASSETS
Unaudited Audited
As at
30 June
2018
As at
31 December
2017
HK$’000 HK$’000
PDP (a) 4,698,543 3,433,531
Assets classified as held for sale (b) 3,572,486 –
Interest capitalised 220,154 154,903
Prepayments and receivables relating to aircraft acquisition 456,553 366,396
Deposits paid 44,722 42,112
Amounts due from related parties (Note 31(f)) 3,380 588
Others (c) 73,246 23,986
9,069,084 4,021,516
(a) In December 2014, the Group entered into aircraft purchase agreements with Airbus S.A.S
(“Airbus”) for the purchase of 100 aircraft. In December 2017 and January 2018, the Group
further entered into an agreement with Airbus for the purchase of additional 65 aircraft which
was executed in the form of amendment agreement to the aircraft purchase agreement signed
in December 2014.
In June 2017, the Group entered into aircraft purchase agreements with The Boeing Company
for the purchase of 50 aircraft.
Prepayments were made according to the payment schedules set out in the aircraft purchase
agreements. The aircraft will be delivered in stages by 2023.
(b) Pursuant to the agreement dated 26 June 2018 jointly signed by the Group and CAG Group stated
in Note 10, the Group disposed aircraft by way of a transfer of share of certain wholly-owned
subsidiaries which own direct interests in lease-attached aircraft. Subsequent to 30 June 2018,
the Group further disposed certain aircraft by way of a transfer of share of certain wholly-owned
subsidiaries to CAG Group (Note 33). The associated assets and liabilities for those subsidiaries
intended to be disposed were consequently classified as held for sale.
Aircraft classified as held for sale during the reporting period was measured at the lower of its
carrying amount and fair value less costs to sell at the time of the reclassification, resulting in
the recognition of write-downs of certain aircraft in the consolidated statement of income.
(c) The “Others” above were unsecured, interest-free and repayable on demand.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 57
12 SHARE CAPITALOrdinary shares, issued and fully paid:
Par value of
each share
Number of
issued shares
Share capital
in HK$
Issued:
As at 1 January 2017 HK$0.1 669,900,640 66,990,064
Issue of new shares from exercise of
share options HK$0.1 8,278,720 827,872
As at 31 December 2017 and 1 January 2018 HK$0.1 678,179,360 67,817,936
Issue of new shares from exercise of
share options HK$0.1 4,020 402
As at 30 June 2018 HK$0.1 678,183,380 67,818,338
During the six months ended 30 June 2018, a grantee exercised share options granted under share
option schemes, resulting in 4,020 (year ended 31 December 2017: 8,278,720) new shares being issued,
with total proceeds of HK$7,000 (year ended 31 December 2017: HK$21,556,000). The related weighted
average share price at the time of exercise was HK$7.77 (year ended 31 December 2017: HK$9.65) per
share. As at 30 June 2018, 16,823,400 (31 December 2017: 8,432,220) share options were exercisable.
Movement of outstanding share options granted by the Group on 4 August 2011 (Pre-IPO Share Option
Scheme), 2 September 2014 (First Post-IPO Share Option Scheme) and 22 July 2016 (Second Post-IPO
Share Option Scheme) is as follows:
Unaudited Unaudited
Six months ended 30 June 2018 Six months ended 30 June 2017
Pre-IPO Post-IPO Total Pre-IPO Post-IPO Total
Beginning of period 4,020 25,875,000 25,879,020 6,606,140 27,955,600 34,561,740
Exercised (4,020) – (4,020) (6,510,320) (926,600) (7,436,920)
Lapsed – (334,000) (334,000) (91,800) (112,200) (204,000)
End of period – 25,541,000 25,541,000 4,020 26,916,800 26,920,820
For share options outstanding as at 30 June 2018, the exercise price per share of Second Post-IPO
Share Option Scheme was HK$8.80.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
China Aircraft Leasing Group Holdings Limited Interim Report 201858
12 SHARE CAPITAL (continued)
The amounts of share-based compensation recognised as expenses with a corresponding credit to
reserves of the Group during the six months ended 30 June 2018 and 2017 are as follows:
Unaudited
Six months ended 30 June
2018 2017
HK$’000 HK$’000
Directors and employees 3,472 9,472
13 RESERVES AND OTHERS
Unaudited
Share
premium
Merger
reserve
Capital
reserve
Share-
based
payments
Cash flow
hedges
Convertible
bonds
Currency
translation
difference
Treasury
shares Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Balance as at 1 January 2017 1,075,957 623,720 (39) 23,989 87,462 37,163 (8,558) – 1,839,694
Share of reserves of an associate – – – – – – 5,389 – 5,389
Share option scheme:
– Value of services (Note 12) – – – 9,472 – – – – 9,472
– Issue of new shares from
exercise of share options 16,993 – – (1,546) – – – – 15,447
Cash flow hedges (Note 20) – – – – (15,709) – – – (15,709)
Currency translation differences – – – – – – 17,313 – 17,313
Repurchase of convertible bonds
(Note 18) – – – – – (18,582) – – (18,582)
Balance as at 30 June 2017 1,092,950 623,720 (39) 31,915 71,753 18,581 14,144 – 1,853,024
Balance as at 1 January 2018 1,099,227 623,720 (39) 36,632 85,024 18,581 (1,487) – 1,861,658
Share option scheme:
– Value of services (Note 12) – – – 3,472 – – – – 3,472
– Issue of new shares from
exercise of share options
(Note 12) 7 – – – – – – – 7
Cash flow hedges (Note 20) – – – – 77,121 – – – 77,121
Currency translation differences – – – – – – 9,464 – 9,464
Buy-back of shares (a) – – – – – – – (3,487) (3,487)
Transfer of reserves upon maturity
of convertible bonds (Note 18) – – – – – (18,581) – – (18,581)
Balance as at 30 June 2018 1,099,234 623,720 (39) 40,104 162,145 – 7,977 (3,487) 1,929,654
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 59
13 RESERVES AND OTHERS (continued)
(a) The Company acquired 437,000 of its own shares through purchases on the Stock Exchange during
the period. The total amount paid to acquire the shares was HK$3,487,000, including transaction
costs. 437,000 of its own shares have been deducted from the shareholders’ equity as treasury
shares.
14 DEFERRED INCOME TAX LIABILITIESThe analysis of deferred tax liabilities is as follows:
Unaudited Audited
As at
30 June
2018
As at
31 December
2017
HK$’000 HK$’000
Deferred income tax liabilities:– To be settled within 12 months 80,744 79,126– To be settled after 12 months 563,855 465,423
644,599 544,549
The movement of the deferred income tax liabilities during the six months ended 30 June 2018, without
taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:
Accelerated
depreciation
of leased
assets
HK$’000
Deferred income tax liabilities:
As at 1 January 2017 332,824
Charged to profit or loss (Note 28) 37,963
Currency translation difference 3,798
As at 30 June 2017 374,585
As at 1 January 2018 544,549
Charged to profit or loss (Note 28) 98,127
Currency translation difference 1,923
As at 30 June 2018 644,599
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
China Aircraft Leasing Group Holdings Limited Interim Report 201860
14 DEFERRED INCOME TAX LIABILITIES (continued)
The Group offsets its deferred tax assets and deferred tax liabilities to the extent that they relate to
the same entity and the same taxation authority.
15 BANK BORROWINGS
Unaudited Audited
As at
30 June
2018
As at
31 December
2017
HK$’000 HK$’000
Bank borrowings for aircraft acquisition financing (a) 11,718,744 13,981,599
PDP financing (b) 3,053,204 1,709,129
Working capital borrowings (c) 821,872 767,683
15,593,820 16,458,411
(a) Bank borrowings for aircraft acquisition financing are principally based on fixed or floating US$
LIBOR rates. As at 30 June 2018, certain bank borrowings were secured by, in addition to other
legal charges, the related aircraft leased to airline companies under either finance leases or
operating leases, pledge of the shares in the subsidiaries owning the related aircraft, guarantees
from certain companies of the Group, and pledge of deposits amounting to HK$204,444,000
(31 December 2017: HK$312,434,000).
(b) As at 30 June 2018, PDP financing of HK$1,748,912,000 (31 December 2017: HK$478,817,000) was
unsecured and guaranteed by the Company. Other PDP financing was secured by certain rights
and benefits in respect of the acquisition of the aircraft, and guarantees from certain companies
of the Group.
(c) As at 30 June 2018, the Group had aggregate unsecured working capital borrowings of
HK$821,872,000 (31 December 2017: HK$767,683,000) which were guaranteed by certain companies
of the Group.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 61
15 BANK BORROWINGS (continued)
The Group has the following undrawn borrowing facilities:
Unaudited Audited
As at
30 June
2018
As at
31 December
2017
HK$’000 HK$’000
Floating rate:– Expiring within one year – 78,149– Expiring beyond one year 2,556,507 4,162,946
2,556,507 4,241,095
16 LONG-TERM BORROWINGS
Unaudited Audited
As at
30 June
2018
As at
31 December
2017
HK$’000 HK$’000
Borrowings from trust plans (a) 5,053,649 5,018,672
Other borrowings (b) 315,076 310,724
5,368,725 5,329,396
(a) As at 30 June 2018, 44 borrowings (31 December 2017: 43 borrowings) were provided to the
Group by investors under trust plans or an asset-backed securities programme (both are in
relation to the disposal of finance lease receivable transactions). The effective average interest
rates of the long-term borrowings range from 3.5% to 7.8% (31 December 2017: 3.5% to
7.8%) per annum for remaining terms of six to 12 years (31 December 2017: six to 11 years).
These long-term borrowings are secured by the shares of, and the aircraft held by the relevant
subsidiaries, guaranteed by certain companies of the Group, and pledge of deposits amounting
to HK$44,362,000 (31 December 2017: HK$41,969,000).
(b) As at 30 June 2018, four borrowings (31 December 2017: four borrowings) were obtained through
a structured financing arrangement for four aircraft (31 December 2017: four aircraft) delivered to
airlines. These borrowings bear an effective interest rate ranging from 3.9% to 5.7% (31 December
2017: 3.9% to 5.7%) per annum for their remaining terms of seven to eight years (31 December
2017: seven to eight years) and are guaranteed by the Company.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
China Aircraft Leasing Group Holdings Limited Interim Report 201862
17 MEDIUM-TERM NOTESIn July 2015, the Group issued five-year senior unsecured medium-term notes in a principal amount of
RMB340 million due in 2020, bearing coupon interest at 6.50% per annum.
In November 2016, the Group issued five-year senior unsecured medium-term notes in a principal
amount of RMB330 million due in 2021, bearing coupon interest at 4.19% per annum.
As at 30 June 2018, after deducting the issuing cost, the total carrying amount of these notes was
HK$788,803,000 (31 December 2017: HK$798,094,000).
18 CONVERTIBLE BONDS
Audited
As at 31 December 2017
Liability Equity Total
HK$’000 HK$’000 HK$’000
Carrying value as at 1 January 2017 292,706 37,163 329,869
Repurchase of convertible bonds during 2017 (147,802) (18,582) (166,384)
Interest accrued at effective interest rate
(inclusive of arrangement fees) during 2017 23,107 – 23,107
Interest paid (inclusive of arrangement fees)
during 2017 (14,821) – (14,821)
Carrying value as at 31 December 2017 153,190 18,581 171,771
Unaudited
As at 30 June 2018
Liability Equity Total
HK$’000 HK$’000 HK$’000
Carrying value as at 1 January 2018 153,190 18,581 171,771
Interest accrued at effective interest rate (inclusive
of arrangement fees) during the period 7,012 – 7,012
Interest paid (inclusive of arrangement fees)
during the period (5,042) – (5,042)
Redemption during the period (155,160) (18,581) (173,741)
Carrying value as at 30 June 2018 – – –
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 63
18 CONVERTIBLE BONDS (continued)
In April and May 2015, the Company completed the issue of convertible bonds at par values of HK$387.9
million, HK$116.4 million and HK$387.9 million respectively to China Huarong International Holdings
Limited (“Huarong”), China Great Wall AMC (International) Holdings Company Limited (“Great Wall”)
and China Everbright Financial Investments Limited (“CE Financial”). These bonds bear coupon interest
at 3.0% per annum and arrangement fees of 3.5% per annum with maturity of three years from the
issue date and can be converted into shares at the holder’s option at any time between the 41st day
from issue date and to the 10th day prior to maturity date. The conversion price is HK$11.28 per share,
subject to adjustment in accordance with the terms and conditions of the bonds.
In July 2016, the Company entered into separate agreements with Huarong, Great Wall and CE
Financial to repurchase issued convertible bonds in the aggregate principal amount of HK$581,850,000
for an aggregate consideration of HK$590,578,000 plus the relevant interest and fees. This included a
repurchase from CE Financial in a principal amount of HK$77,580,000. Based on the fair value estimated
and redemption expenses at the completion of repurchase on 25 July 2016, a liability component
of HK$524,370,000 and equity component of HK$79,378,000 were derecognised, and a net loss of
HK$39,000 was charged to “Other gains” for the year ended 31 December 2016.
In May 2017, the Company entered into a separate agreement with CE Financial to repurchase issued
convertible bonds in the aggregate principal amount of HK$155,160,000 for an aggregate consideration
of HK$156,711,600 plus the relevant interest and fees. Based on the fair value estimated and redemption
expenses at the completion of repurchase on 15 May 2017, a liability component of HK$147,802,000
and equity component of HK$18,582,000 were derecognised, of which HK$12,541,000 was realised and
reclassified from convertible bonds reserve to retained earnings, and a net loss of HK$3,055,000 was
charged to “Other gains” for the year ended 31 December 2017. After the repurchase, the principal
amount of convertible bonds held by CE Financial was HK$155,160,000.
Interest expenses (Note 25) on the carrying amount of the liability component were paid or accrued
at the effective interest rate (inclusive of arrangement fees) of 11.8% (six months ended 30 June
2017: 11.8%) to adjust the carrying amount of the liability component to its amortised cost, being the
present value of the expected future cash flows relating to periodic interest payments and principal
repayment at par value at the maturity date.
In May 2018, the convertible bonds with aggregate principal amount of HK$155,160,000 was fully
redeemed upon maturity.
19 BONDSIn May 2016, the Group issued three-year US$300 million senior unsecured bonds due in 2019, bearing
coupon interest at 5.9% per annum, payable semi-annually.
In August 2016, the Group issued five-year US$300 million senior unsecured bonds due in 2021, bearing
coupon interest at 4.9% per annum, payable semi-annually.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
China Aircraft Leasing Group Holdings Limited Interim Report 201864
19 BONDS (continued)
In March 2017, the Group issued senior unsecured bonds in an aggregate principal amount of US$500
million, of which US$300 million are five-year bonds due in 2022 and US$200 million are seven-year
bonds due in 2024. The bonds bear coupon interest at 4.7% and 5.5% per annum, respectively, payable
semi-annually.
These bonds were listed on the Stock Exchange and are guaranteed by the Company. After deducting
the issuing cost, total carrying amount of these bonds as at 30 June 2018 was HK$8,584,180,000
(31 December 2017: HK$8,538,932,000).
20 DERIVATIVE FINANCIAL INSTRUMENTS
Unaudited Audited
As at
30 June
2018
As at
31 December
2017
HK$’000 HK$’000
Derivative financial assets– Currency swap (a) 12,577 14,966– Interest rate swaps (b) 162,145 75,869
174,722 90,835
Derivative financial liabilities– Interest rate swaps (b) – 207
(a) CALC Baoli Limited (“CALC Baoli”), a wholly-owned subsidiary of the Group, signed a contract
with an independent third party on 30 December 2013, pursuant to which CALC Baoli transferred
its future aircraft finance lease receivables under an aircraft leasing agreement with an airline to
a trust plan. CALC Baoli will convert the US$ lease rentals received on behalf of the third party
during the period from 27 February 2024 to 27 May 2025 to RMB at a pre-determined exchange
rate at its own risk. This arrangement constituted a derivative – a currency swap contract. The
notional principal of this currency swap contract amounted to US$15,684,000. As at 30 June 2018,
the fair value of this currency swap contract amounted to HK$12,577,000 (31 December 2017:
HK$14,966,000) and the fair value loss of HK$2,445,000 was recognised in “Other gains/(losses)” for
the six months ended 30 June 2018 (six months ended 30 June 2017: loss of HK$1,351,000). As at
30 June 2018, this arrangement was secured by a pledged deposit of HK$3,607,000 (31 December
2017: HK$3,633,000).
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 65
20 DERIVATIVE FINANCIAL INSTRUMENTS (continued)
(b) As at 30 June 2018, the Group had 22 outstanding interest rate swap contracts (31 December
2017: 22 contracts) which will expire at various dates from 21 September 2018 to 21 December
2024 (31 December 2017: 21 September 2018 to 21 December 2024), to exchange floating interest
rates from LIBOR into fixed interest rates in a range of 1.3% to 2.0% (31 December 2017: 1.3%
to 2.0%).
(i) 22 outstanding interest rate swap contracts were accounted for as cash flow hedges, which
were virtually fully effective during the period ended 30 June 2018 (31 December 2017: 22
contracts).
(ii) In March 2017, the Group terminated three interest rate swap contracts with total realised
gain of US$4,120,000. This realised gain was recognised in cash flow hedges reserve and
will be progressively reclassified from equity to interest expenses during the remaining
interest repayment period of the hedged bank borrowing from 2017 to 2027. During the six
months ended 30 June 2017, the realised gain of HK$2,332,000 was reclassified from cash
flow hedges reserve to interest expenses. In May 2017, one of the hedged bank borrowings
was fully repaid and the respective remaining balance of realised gain of HK$9,872,000 was
reclassified from cash flow hedges reserve to “Other gains/(losses)”.
(iii) During the period ended 30 June 2017, the Group repaid one bank borrowing which was
hedged by an interest rate swap. As a result, such hedge no longer met the criteria for
hedge accounting and the cumulative fair value losses of HK$2,373,000 were reclassified from
cash flow hedges reserve to “Other gains/(losses)” upon the repayment of bank borrowings.
During the period ended 30 June 2017, total seven interest rate swap contracts did not meet
the criteria for hedge accounting and their total fair value losses of HK$3,921,000 were
directly recognised to “Other gains/(losses)”.
(iv) In December 2017, the Group terminated one interest rate swap contract with a realised
gain of US$1,198,000. This realised gain was recognised in cash flow hedges reserve and will
be progressively reclassified from equity to interest expenses during the remaining interest
repayment period of the hedged bank borrowing from 2018 to 2021. On 5 January 2018,
such bank borrowing was fully repaid and the balance of realised gain of US$1,198,000
(equivalent to HK$9,389,000) was reclassified from cash flow hedges reserve to “Other gains/
(losses)” for the six months ended 30 June 2018.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
China Aircraft Leasing Group Holdings Limited Interim Report 201866
20 DERIVATIVE FINANCIAL INSTRUMENTS (continued)
The fair value changes of derivative financial instruments recognised in other comprehensive income
and profit or loss are as follows:
Unaudited
Six months ended 30 June
2018 2017
HK$’000 HK$’000
Recognised in other comprehensive income– Change in fair values of interest rate swaps (b)(i) 86,510 (5,878)– Reclassified from other comprehensive income to
profit or loss (b)(ii) to (iv) (9,389) (9,831)
77,121 (15,709)
Recognised in profit or loss– Fair value losses on interest rate swaps (b)(iii) – (3,921)– Unrealised loss on a currency swap (a) (2,445) (1,351)– Realised gains on interest rate swaps (b)(ii) and (iv) 9,389 9,872
6,944 4,600
21 OTHER LIABILITIES AND ACCRUALS
Unaudited Audited
As at
30 June
2018
As at
31 December
2017
HK$’000 HK$’000
Liabilities directly associated with assets classified
as held for sale (a) 2,870,066 –
Deposits and fund received for lease and aircraft projects 1,378,563 1,520,619
Consultant and insurance premium payable 144,430 152,071
Value-added tax and withholding tax payables 550,230 477,613
Operating lease rentals received in advance 122,688 118,176
Others (including salary and bonus payable) 222,091 231,923
5,288,068 2,500,402
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 67
21 OTHER LIABILITIES AND ACCRUALS (continued)
(a) Balance represents bank borrowings for aircraft acquisition financing of HK$2,566,474,000
(31 December 2017: Nil) and other payables of HK$303,592,000 (31 December 2017: Nil) directly
associated with assets classified as held for sale.
22 LEASE INCOME AND SEGMENT INFORMATIONDuring the six months ended 30 June 2018, the Group was engaged in a single business segment, the
provision of aircraft leasing services to airline companies in the United States, Mainland China and
other countries or regions in Europe, Asia and South America. The Group leases its aircraft to airline
companies under finance leases or operating leases under which it receives rentals.
The following table sets forth the amounts of total finance and operating lease income attributable
to individual airline companies:
Unaudited
Six months ended 30 June
2018 2017
HK$’000 % HK$’000 %
Categorised by customer in terms of lease
income:
Airline company – A 99,840 9% 106,602 12%
Airline company – B 92,015 8% 89,635 10%
Airline company – C 83,160 7% 88,493 10%
Airline company – D 76,127 7% 92,230 10%
Airline company – E 66,770 6% 66,527 8%
Other airline companies 744,175 63% 437,425 50%
Total finance and operating lease income 1,162,087 100% 880,912 100%
23 NET GAIN FROM AIRCRAFT TRANSACTIONSThe net gain from aircraft transactions for the six months ended 30 June 2017 represented the gain
from disposal of the finance lease receivables of 10 aircraft. Certain wholly-owned subsidiaries of the
Group signed separate contracts with the trust plans to transfer their future aircraft lease receivables
under their separate aircraft lease agreements with certain airline companies to the trust plans. As
the Group has transferred substantially all the risks and rewards related to the lease receivables, it de-
recognised the corresponding finance lease receivables and recorded the gain from disposal of finance
lease receivables in the consolidated financial statements.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
China Aircraft Leasing Group Holdings Limited Interim Report 201868
23 NET GAIN FROM AIRCRAFT TRANSACTIONS (continued)
The net gain from aircraft transactions for the six months ended 30 June 2018 included the gain from
disposal of the finance lease receivables of one aircraft, the gain from one lease-attached aircraft
disposed to a wholly-owned subsidiary of ARI and the net gain from four lease-attached aircraft
disposed to CAG Group by way of transferring the share interests of those wholly-owned subsidiaries
which own direct interests in the lease-attached aircraft and leases, determined by comparing the net
proceeds with the relevant carrying amount of net assets less transaction costs and other expenses.
24 OTHER INCOME
Unaudited
Six months ended 30 June
2018 2017
HK$’000 HK$’000
Government grants (a) 118,097 49,407
Bank interest income 7,142 19,631
Interest income from loans to an associate (Note 8) 44,769 12,447
Operating lease income on office premises from a related party
(Note 31(a)) 638 637
Operating lease income on other assets from a related party
(Note 31(c)) 1,320 –
Operating lease income on office premises from an associate
(Note 31(d)) 1,420 2,371
Others 33,622 3,058
207,008 87,551
(a) Government grants represent the grants and subsidies received from Mainland China government
to support the development of aircraft leasing industry.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 69
25 INTEREST EXPENSES
Unaudited
Six months ended 30 June
2018 2017
HK$’000 HK$’000
Interest expenses on bank borrowings 365,233 353,951
Fair value (gain)/loss on interest rate swaps designated as cash flow
hedges – transfer from other comprehensive income (1,666) 15,019
Interest expenses on long-term borrowings 177,330 85,214
Interest expenses on convertible bonds (a) 7,012 14,480
Interest expenses on medium-term notes 23,048 21,171
Interest expenses on bonds 237,252 196,356
Less: interest capitalised on qualifying assets (b) (110,271) (71,544)
697,938 614,647
(a) Interest expenses on convertible bonds consists of interest paid or payable of HK$1,862,000 (six
months ended 30 June 2017: HK$4,024,000) which is calculated based on interest rate of 3.0% per
annum. The remaining amount represents arrangement fee based on a rate of 3.5% per annum
and the notional adjustment to accrete the carrying amount of liability component of convertible
bonds to the present value of estimated future cash flows expected to be required for settlement
up to maturity date.
(b) Interest expenses capitalised on qualifying assets represents the amount of interest on interest-
bearing debts which is directly attributable to the acquisition of aircraft and was capitalised as
the cost of aircraft upon delivery of aircraft.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
China Aircraft Leasing Group Holdings Limited Interim Report 201870
26 OTHER OPERATING EXPENSES
Unaudited
Six months ended 30 June
2018 2017
HK$’000 HK$’000
Employee benefit expenses 75,700 57,422
Professional service expenses 28,225 21,556
Value-added tax and other taxes 40,875 36,871
Rental and utilities expenses 13,827 12,863
Office and meeting expenses 9,067 4,125
Travelling and training expenses 7,348 6,239
Auditor’s remuneration– Audit service 900 900– Non-audit service 3,013 673
Impairment loss of finance lease receivables 7,367 –
Others 26,134 17,201
212,456 157,850
27 OTHER GAINS/(LOSSES)
Unaudited
Six months ended 30 June
2018 2017
HK$’000 HK$’000
Unrealised loss on a currency swap (Note 20) (2,445) (1,351)
Fair value losses on interest rate swaps (Note 20) – (3,921)
Realised gains on interest rate swaps (Note 20) 9,389 9,872
Currency exchange gains/(losses) 163 (7,285)
Loss on repurchase of convertible bonds (Note 18) – (3,055)
7,107 (5,740)
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 71
28 INCOME TAX EXPENSES
Unaudited
Six months ended 30 June
2018 2017
HK$’000 HK$’000
Current income tax:
Mainland China, Hong Kong and others 12,950 56,189
Deferred income tax 98,127 37,963
111,077 94,152
Mainland ChinaThe subsidiaries incorporated in Mainland China are subject to the PRC corporate income tax (“CIT”)
at a rate of 25% (six months ended 30 June 2017: 25%). The leasing income of the subsidiaries in
Mainland China is subject to VAT at 16% from 1 May 2018.
Hong KongThe subsidiaries incorporated in Hong Kong are subject to Hong Kong profits tax at 16.5% on the
estimated assessable profits.
OthersThe Company and its subsidiaries incorporated in the Cayman Islands are exempted from income tax
in the Cayman Islands.
The subsidiaries incorporated in the British Virgin Islands are exempted from income tax in the British
Virgin Islands.
The subsidiaries incorporated in Ireland, being section 110 companies under the Irish tax regime are
subject to corporate tax at 25%. Other Irish companies are subject to corporate tax at 12.5%.
The subsidiary incorporated in the Netherlands is subject to income tax at 20% over the first EUR200,000
of its taxable income and a rate of 25% over its taxable income in excess of EUR200,000.
The subsidiary incorporated in France is subject to income tax at 33.33%.
The subsidiary incorporated in Singapore is subject to income tax at 17%.
The subsidiaries incorporated in Labuan are subject to income tax at 3% on the net profits or at
Malaysian Ringgit 20,000 as elected annually by the subsidiaries.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
China Aircraft Leasing Group Holdings Limited Interim Report 201872
29 DIVIDENDS
Unaudited
Six months ended 30 June
2018 2017
HK$’000 HK$’000
Interim dividend proposed of HK$0.22 (2017: HK$0.18)
per ordinary share 148,999 122,072
On 24 March 2017, the Board declared a final dividend of HK$0.39 per ordinary share totalling HK$264.1
million for the year ended 31 December 2016, which was paid in June 2017.
On 25 August 2017, the Board declared an interim dividend of HK$0.18 per ordinary share totalling
HK$122.1 million for the six months ended 30 June 2017, which was paid in September 2017.
On 23 March 2018, the Board declared a final dividend of HK$0.42 per ordinary share totalling HK$284.8
million for the year ended 31 December 2017, which was paid in June 2018.
On 24 August 2018, the Board declared an interim dividend of HK$0.22 per ordinary share totalling
HK$149.0 million which is calculated based on 677,269,380 issued shares as at 24 August 2018. The
proposed dividend is not reflected as a dividend payable in the consolidated financial statements as
at 30 June 2018, and will be reflected as an appropriation of retained earnings for the year ending
31 December 2018.
30 EARNINGS PER SHARE (a) Basic
Basic earnings per share is calculated by dividing the profit attributable to shareholders of the
Company by the weighted average number of ordinary shares in issue during the six months
ended 30 June 2017 and 2018.
Unaudited
Six months ended 30 June
2018 2017
Profit attributable to shareholders of the Company (HK$’000) 307,845 248,670
Weighted average number of ordinary shares in issue
(number of shares in thousands) 678,173 672,950
Basic earnings per share (HK$ per share) 0.454 0.370
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 73
30 EARNINGS PER SHARE (continued)
(b) DilutedDiluted earnings per share is calculated by adjusting the weighted average number of ordinary
shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company
has one category of dilutive potential ordinary shares: share options. Share options are dilutive
where they would result in the issue of ordinary shares for less than the average market price of
ordinary shares during the period. The number of shares that would have been issued assuming the
exercise of the share options less the number of shares that could have been issued at fair value
(determined as the average market price per share for the period) for the same total proceeds is
the number of shares issued for no consideration. The resulting number of shares issued for no
consideration is included in the weighted average number of ordinary shares as the denominator
for calculating diluted earnings per share.
Unaudited
Six months ended 30 June
2018 2017
Earnings
Profit attributable to shareholders of the Company (HK$’000) 307,845 248,670
Weighted average number of ordinary shares for diluted
earnings per share
Weighted average number of ordinary shares in issue (number
of shares in thousands) 678,173 672,950
Adjustment for:– Share options (number of shares in thousands) – 3,605
Weighted average number of ordinary shares for diluted
earnings per share (number of shares in thousands) 678,173 676,555
Diluted earnings per share (HK$ per share) 0.454 0.368
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
China Aircraft Leasing Group Holdings Limited Interim Report 201874
31 RELATED PARTY TRANSACTIONSThe following transactions were carried out with related parties at terms negotiated between the
Group and the respective parties:
(a) Transactions with Friedmann Pacific Asset Management Limited (“FPAM”) and its subsidiaries (collectively as “FPAM Group”)
Unaudited
Six months ended 30 June
2018 2017
HK$’000 HK$’000
Operating lease income on office premises earned from:
Friedmann Pacific Financial Services Limited 638 637
(b) Transactions with China Everbright Limited (“CEL”) and its subsidiaries
Unaudited
Six months ended 30 June
2018 2017
HK$’000 HK$’000
Operating lease expenses on office premises charged by:
CEL Venture Capital (Shenzhen) Limited – 123
(c) Transactions with China Everbright Group Ltd. (“CE Group”)CE Group is the sole shareholder of China Everbright Holdings Company Limited (“CE Hong
Kong”). CE Hong Kong is the indirect controlling shareholder of CEL and CEL indirectly holds
approximately 33.6% equity interest in the Company as at 30 June 2018. Accordingly, CE Group
is deemed as a controlling shareholder of the Company, and thus CE Group and its subsidiaries,
have become related parties of the Company.
(i) Deposit, loan and facilities services provided by CE Group
On 14 May 2015, the Company entered into a deposit services framework agreement, a loan
services framework agreement and an assignment of finance lease receivables framework
agreement with CE Group. Pursuant to the deposit services framework agreement, CE Group
will provide deposit services to the Group through its associate, China Everbright Bank Co.,
Ltd. (“CE Bank”). Pursuant to the loan services framework agreement, CE Group will provide
secured loan services and guarantees to the Group through CE Bank and through the trustee
of a trust plan of which CE Group is a beneficiary. Pursuant to the assignment of finance
lease receivables framework agreement, the Group will assign the finance lease receivables
to the trustee.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 75
31 RELATED PARTY TRANSACTIONS (continued)
(c) Transactions with China Everbright Group Ltd. (“CE Group”) (continued)
(i) Deposit, loan and facilities services provided by CE Group (continued)
Unaudited
Six months ended 30 June
2018 2017
HK$’000 HK$’000
Interest income from CE Group 2,223 1,326
Interest expenses to CE Group 138,292 94,387
Loans upfront and arrangement fee to CE Group 1,973 8,372
Transactions handling charges to CE Group 1,434 1,554
Guarantee issuing fee to CE Group – 146
Cash consideration from CE Group for disposal of finance
lease receivables – 1,856,908
Unaudited Audited
As at
30 June
2018
As at
31 December
2017
HK$’million HK$’million
Bank deposits placed in CE Group 1,450.6 2,586.2
Borrowings due to CE Group 4,944.7 3,840.1
Undrawn facilities provided by CE Group 405.1 646.2
(ii) Repurchase of convertible bonds to CE Financial
During the six months ended 30 June 2017, the Company repurchased issued convertible
bonds in the aggregate principal amount of HK$155,160,000 from CE Financial (Note 18).
After the repurchase, the principal amount of convertible bonds held by CE Financial was
HK$155,160,000. In May 2018, the principal amount was fully redeemed upon maturity. The
interest expenses incurred at an effective interest of 11.8% amounted to HK$7,012,000 for
the six months ended 30 June 2018 (six months ended 30 June 2017: HK$14,480,000).
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
China Aircraft Leasing Group Holdings Limited Interim Report 201876
31 RELATED PARTY TRANSACTIONS (continued)
(c) Transactions with China Everbright Group Ltd. (“CE Group”) (continued)
(iii) Lease of other assets to CEL Management Services Limited (“CEL Management”)
Unaudited
Six months ended 30 June
2018 2017
HK$’000 HK$’000
Operating lease income on other assets earned from:
CEL Management 1,320 –
(d) Transactions with an associate (i) Lease of office premises to an associate
Unaudited
Six months ended 30 June
2018 2017
HK$’000 HK$’000
Operating lease income on office premises earned from:
ARI 1,420 2,371
(ii) Loans to an associate
Pursuant to the shareholders’ loan agreement dated 6 April 2016, the Group granted loans
to ARI which are secured by pledge of shares in a subsidiary of ARI, bearing interest at 4%
per annum above the prime lending rate quoted by the Bank of China (Hong Kong) Limited
which is accrued daily and payable in arrears of six monthly intervals from the date of issue
of the loan note. As at 30 June 2018, the outstanding balance receivable from ARI was
amounted to HK$929,693,000 (31 December 2017: HK$870,188,000) (Note 8) and the share
of interest income for the six months ended 30 June 2018 was HK$44,769,000 (six months
ended 30 June 2017: HK$12,447,000).
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 77
31 RELATED PARTY TRANSACTIONS (continued)
(e) Disposal of aircraft to CAG Group and subsidiary of ARIThe Group has significant influence over CAG Group and ARI. The Group disposed one aircraft to
the wholly-owned subsidiary of ARI and disposed or intends to dispose 18 aircraft by way of a
transfer of share of certain wholly-owned subsidiaries which own direct interests in lease-attached
aircraft to CAG Group. During the six months ended 30 June 2018, the total consideration from
aforementioned disposal of aircraft to wholly-owned subsidiary of ARI and CAG Group is HK$1,631
million (six months ended 30 June 2017: Nil) and the Group recorded a net gain from aircraft
transactions (Note 23) in the consolidated financial statements.
(f) Amounts due from related parties
Unaudited Audited
As at
30 June
2018
As at
31 December
2017
HK$’000 HK$’000
CEL Management 60 –
ARI 3,314 588
FPAM Group 6 –
3,380 588
The above amounts due from related parties were unsecured, interest-free and repayable on
demand.
32 CONTINGENT LIABILITIES AND COMMITMENTS (a) Contingencies
The Group had no material contingent liabilities outstanding as at 30 June 2018 (31 December
2017: Nil).
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
China Aircraft Leasing Group Holdings Limited Interim Report 201878
32 CONTINGENT LIABILITIES AND COMMITMENTS (continued)
(b) Capital commitmentsCapital expenditures contracted but not provided for at the end of the reporting period are as
follows:
Unaudited Audited
As at
30 June
2018
As at
31 December
2017
HK$’000 HK$’000
Contracted but not provided for:
Purchase of aircraft 83,317,689 76,030,351
Shareholder loan commitment to CAG Group (Note 10) 426,540 –
Additions to property, plant and equipment excluding aircraft 663 255
83,744,892 76,030,606
(c) Operating lease commitments – where the Group is the lesseeThe future aggregate minimum lease payments under non-cancellable operating lease in respect
of office premises are as follows:
Unaudited Audited
As at
30 June
2018
As at
31 December
2017
HK$’000 HK$’000
Not later than one year 11,665 15,412
Later than one year and not later than five years 9,522 9,774
Later than five years 1,106 1,501
22,293 26,687
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Interim Report 2018 China Aircraft Leasing Group Holdings Limited 79
32 CONTINGENT LIABILITIES AND COMMITMENTS (continued)
(d) Operating lease arrangement – where the Group is the lessorThe Group had future minimum lease receipts under non-cancellable operating leases or sub-leases
in respect of office premises and other assets as follows:
Unaudited Audited
As at
30 June
2018
As at
31 December
2017
HK$’000 HK$’000
Not later than one year 3,252 5,063
Later than one year and not later than five years 3,144 3,960
6,396 9,023
The above amount included the following future minimum lease receipts from related parties:
Unaudited Audited
As at
30 June
2018
As at
31 December
2017
HK$’000 HK$’000
Not later than one year 3,069 5,063
Later than one year and not later than five years 2,640 3,960
5,709 9,023
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
China Aircraft Leasing Group Holdings Limited Interim Report 201880
32 CONTINGENT LIABILITIES AND COMMITMENTS (continued)
(d) Operating lease arrangement – where the Group is the lessor (continued)
The Group had future minimum lease receipts under non-cancellable operating leases in respect
of aircraft as follows:
Unaudited Audited
As at
30 June
2018
As at
31 December
2017
HK$’000 HK$’000
Not later than one year 1,453,927 1,239,800
Later than one year and not later than five years 5,708,759 4,871,167
Later than five years 5,082,647 4,406,922
12,245,333 10,517,889
33 EVENTS AFTER THE END OF THE REPORTING PERIOD On 22 August 2018, the Group further disposed 5 aircraft by way of share transfer of certain
wholly-owned subsidiaries which own direct interests in lease-attached aircraft to CAG Group and
expected to record a gain from aircraft transactions to the consolidated financial statements.